What Is a Good Risk-Reward Ratio in Trading?

"Only take 1:3 trades" is probably the most copied rule in trading education. The arithmetic behind it is real, but the rule leaves out the half of the equation that decides whether you make money.

What people on X are asking

In June 2026 a crypto educator asked what is the risk-to-reward ratio? and explained it as comparing what you are willing to lose with what you expect to gain. A forex tips account asked followers do you use R:R? and claimed 1:3 equals consistency; that is the poster's opinion. Another trader argued in February that top traders win only about half their trades, which is why reward size matters; the exact win-rate range quoted there is their claim, not a verified statistic.

The fact-checked answer

The definition. For a trade with entry $100, stop $98 and target $106, the risk is $2 and the potential reward is $6, a risk-reward of 1:3 (or a reward-to-risk of 3). Some people write it the other way round (3:1); always check which side is which.

The breakeven formula. If you win R units when right and lose 1 unit when wrong, you break even when win rate × R = (1 − win rate) × 1, which gives a breakeven win rate of 1 ÷ (1 + R).

Breakeven win rate for common risk-reward ratios

Computed by UXS. With a cost c per trade (in units of risk), breakeven win rate = (1 + c) ÷ (1 + R). Tap a column header to sort.

Risk : reward	Reward-to-risk (R)	Breakeven win rate (before costs)	Win rate needed if costs equal 0.1R per trade
1 : 0.5	0.5	66.7%	73.3%
1 : 1	1.0	50.0%	55.0%
1 : 1.5	1.5	40.0%	44.0%
1 : 2	2.0	33.3%	36.7%
1 : 3	3.0	25.0%	27.5%
1 : 5	5.0	16.7%	18.3%

Why "always 1:3" can fail. A distant target is hit less often. If moving your target from 1R to 3R drops your hit rate from 55% to 20%, the trade got worse, not better: expectancy fell from +0.10R to −0.20R per trade. The ratio and the probability come as a pair. Our page on win rate vs expectancy shows how to measure both from your own trades.

Where the numbers come from. The stop belongs where the trade idea is wrong, as we explain in where to put a stop-loss. The target belongs at a level the market can realistically reach, such as the next area of prior highs or lows. If those two places give a poor ratio, skip the trade instead of moving the stop closer.

Costs move the line. Spreads, commissions and slippage are paid on every trade, winning or losing. For a scalper with a tight stop, costs can be a large fraction of the risk, raising the win rate needed (see the last column above).

Free PDF

Risk-reward trade planner (PDF)

Fill in before entering. If the expected value is negative, skip the trade.

Estimate honestly

Breakeven reference

R	Breakeven win rate
1.0	50%
1.5	40%
2.0	33%
3.0	25%

Final check

1. Stop is at a logical level, not moved to improve the ratio
2. Target is a level price has reached before
3. Position size keeps the loss within my limit
4. Expected value is positive after costs

Fill-in fields in the PDF: Market and direction; Entry price; Stop price (where the idea is wrong); Target price (realistic level); Risk per unit = |entry − stop|; Reward per unit = |target − entry|; Reward-to-risk R = reward ÷ risk; My recorded hit rate for this setup (%); Costs per trade in R (spread + commission ÷ risk); Expected value = hit rate × R − (1 − hit rate) − costs.

Download the PDF (44 KB, made by UXS, no sign-up)

Win rate and reward-to-risk are also the two inputs of the Kelly criterion, a formula for bet size.

Your minimum reward-to-risk belongs in your written trading plan.

Decision helper

Checklist

1. Write the stop and target before entry.
2. Compute R and compare it with your recorded hit rate for that setup.
3. Subtract costs.
4. Size the trade from the stop; see how much to risk per trade.
5. Review the actual R achieved, not the planned one, every month.

Quick poll

Which risk-reward do you aim for most often?

• Less than 1:1
• About 1:1
• 1:2
• 1:3 or more
• I do not plan it

Save my answer

What each answer means

• Less than 1:1: Can work only with a high, proven win rate; costs bite hardest here.
• About 1:1: Needs more than 50% winners plus costs; common for short-term trading.
• 1:2: Breakeven near 33% before costs; a popular middle ground.
• 1:3 or more: Breakeven at 25% or less, but targets are reached less often, and losing streaks get long.
• I do not plan it: Without a planned ratio you cannot check whether your edge is positive.

Your answer is stored only in this browser (localStorage). UXS does not collect, count or publish votes, so no totals are shown.

Common mistakes

• Moving the stop closer just to make the ratio look better.
• Comparing planned R with no record of actual hit rates.
• Taking profits early on winners but letting losers hit the full stop, which lowers your real R.
• Forgetting costs on small, frequent trades.

FAQ

What is a good risk-reward ratio for beginners?

Something you can measure: many start with 1:2 and track whether their actual hit rate stays above about 33% plus costs.

Is 1:1 risk-reward bad?

No, if your win rate is reliably above 50% after costs.

How do you calculate risk-reward?

Divide the distance from entry to target by the distance from entry to stop. Entry $100, stop $98, target $106 gives 6 ÷ 2 = 3.

What win rate do I need at 1:3?

More than 25% before costs.

Should I use a fixed risk-reward on every trade?

A minimum is useful, but the target should come from the market structure, not from a fixed multiple.

Does risk-reward matter for long-term investing?

Less directly. Investors think in terms of expected return and maximum drawdown rather than per-trade ratios.