{"id":25,"date":"2026-05-16T03:13:27","date_gmt":"2026-05-16T03:13:27","guid":{"rendered":"http:\/\/docs.traderis.me\/en\/docs\/risk-reward-ratio\/"},"modified":"2026-06-06T04:27:52","modified_gmt":"2026-06-06T04:27:52","password":"","slug":"risk-reward-ratio","status":"publish","type":"docs","link":"https:\/\/docs.traderis.me\/en\/docs\/risk-reward-ratio\/","title":{"rendered":"Risk-Reward Ratio Explained \u2014 Why Expected Value Beats Win Rate in FX"},"content":{"rendered":"\n<div class=\"wp-block-group\" style=\"background-color:#eff6ff;padding-top:20px;padding-right:24px;padding-bottom:20px;padding-left:24px\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<p class=\"wp-block-paragraph\" style=\"font-weight:700\">\ud83d\udccc Key Takeaway<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">With an RR ratio of 2.0, a win rate as low as 33% grows your capital long-term \u2014 meaning win rate alone is irrelevant without consistent lot sizing and a positive expected value mindset.<\/p>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s common in FX trading for &#8220;a trader with an 80% win rate to go broke, while a trader with a 30% win rate builds wealth.&#8221; This is mathematically inevitable once you understand the <strong>Risk-Reward Ratio (RR)<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many discretionary traders obsess over <strong>&#8220;raising the win rate&#8221;<\/strong>, but what really matters for long-term capital growth is <strong>&#8220;the balance between profit per win and loss per loss&#8221;<\/strong> \u2014 the risk-reward ratio.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This article covers the fundamentals of the RR ratio, expected value calculation, practical comparisons, and realistic target settings. Reading <a href=\"https:\/\/docs.traderis.me\/en\/docs\/lot-calculation-basics\/\">Lot Calculation Basics<\/a> first will deepen your understanding.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is the Risk-Reward Ratio?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Risk-Reward Ratio (RR ratio) is a metric showing <strong>how many times your target reward (take-profit) is, relative to the risk (stop-loss) you accept on a trade<\/strong>.<\/p>\n\n\n\n<pre class=\"wp-block-preformatted\"><strong>RR Ratio = Take-Profit (pips) \u00f7 Stop-Loss (pips)<\/strong><\/pre>\n\n\n\n<p class=\"wp-block-paragraph\">For example, a trade with a 20-pip stop-loss and a 60-pip take-profit has an RR ratio of <strong>60 \u00f7 20 = 3.0<\/strong>, written as &#8220;RR = 1:3&#8221; or &#8220;RR = 3&#8221;.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>RR = 1.0 \u2192 stop and take-profit are equal width<\/li>\n<li>RR = 2.0 \u2192 targeting 2x the risk (typical swing baseline)<\/li>\n<li>RR = 3.0+ \u2192 targeting 3x+ the risk (trend-following, longer holds)<\/li>\n<li>RR = 0.5 \u2192 targeting only half the risk (scalping, high-win-rate strategy)<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Expected Value: RR and Win Rate Are a Trade-Off<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To stay profitable long-term in FX, your <strong>Expected Value (EV)<\/strong> must be positive. EV is calculated as:<\/p>\n\n\n\n<pre class=\"wp-block-preformatted\"><strong>EV = (Win Rate \u00d7 Avg Profit) \u2212 (Loss Rate \u00d7 Avg Loss)<\/strong><\/pre>\n\n\n\n<p class=\"wp-block-paragraph\">Fixing the loss amount at 1 unit:<\/p>\n\n\n\n<pre class=\"wp-block-preformatted\"><strong>EV = (Win Rate \u00d7 RR) \u2212 (1 \u2212 Win Rate)<\/strong>\n\nEV &gt; 0 requires:\n  Win Rate &gt; 1 \u00f7 (1 + RR)<\/pre>\n\n\n\n<p class=\"wp-block-paragraph\">The higher the RR, the lower the minimum win rate you need. Let&#8217;s see exact numbers in the table below.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Break-Even Win Rate by RR Ratio<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table>\n<thead><tr><th>RR Ratio<\/th><th>Break-Even Win Rate<\/th><th>Typical Style<\/th><\/tr><\/thead>\n<tbody>\n<tr><td>0.5 (1:0.5)<\/td><td>66.7%<\/td><td>Scalping, high-win-rate counter-trend<\/td><\/tr>\n<tr><td>1.0 (1:1)<\/td><td>50.0%<\/td><td>Swing baseline<\/td><\/tr>\n<tr><td>1.5 (1:1.5)<\/td><td>40.0%<\/td><td>Day trading, pullback entries<\/td><\/tr>\n<tr><td>2.0 (1:2)<\/td><td>33.3%<\/td><td>Swing, trend-following<\/td><\/tr>\n<tr><td>3.0 (1:3)<\/td><td>25.0%<\/td><td>Trend breakout entries<\/td><\/tr>\n<tr><td>5.0 (1:5)<\/td><td>16.7%<\/td><td>Long trend riders, low-frequency, big-move strategies<\/td><\/tr>\n<\/tbody>\n<\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">With RR = 3.0, you only need to win 25% of trades to grow your capital long-term. Conversely, RR = 0.5 scalping requires a 67% win rate to stay profitable.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The &#8220;Win-Rate Trap&#8221; Illustrated<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Compare three traders over 100 trades, each risking a fixed $50 per trade.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Trader A: High-Win-Rate Scalper<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Win rate: <strong>80%<\/strong> (80W \/ 20L)<\/li>\n<li>RR ratio: <strong>0.5<\/strong> (TP +5 pips \/ SL \u221210 pips)<\/li>\n<li>Wins: 80 \u00d7 $25 = <strong>+$2,000<\/strong><\/li>\n<li>Losses: 20 \u00d7 $50 = <strong>\u2212$1,000<\/strong><\/li>\n<li>Total: <strong>+$1,000<\/strong><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Trader B: Mid-Win-Rate Swing<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Win rate: <strong>50%<\/strong> (50W \/ 50L)<\/li>\n<li>RR ratio: <strong>2.0<\/strong> (TP +60 pips \/ SL \u221230 pips)<\/li>\n<li>Wins: 50 \u00d7 $100 = <strong>+$5,000<\/strong><\/li>\n<li>Losses: 50 \u00d7 $50 = <strong>\u2212$2,500<\/strong><\/li>\n<li>Total: <strong>+$2,500<\/strong><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Trader C: Low-Win-Rate Trend Follower<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Win rate: <strong>30%<\/strong> (30W \/ 70L)<\/li>\n<li>RR ratio: <strong>4.0<\/strong> (TP +120 pips \/ SL \u221230 pips)<\/li>\n<li>Wins: 30 \u00d7 $200 = <strong>+$6,000<\/strong><\/li>\n<li>Losses: 70 \u00d7 $50 = <strong>\u2212$3,500<\/strong><\/li>\n<li>Total: <strong>+$2,500<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Comparing the three:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Trader C (30% win rate) earns <strong>2.5x<\/strong> as much as Trader A (80% win rate)<\/li>\n<li>The emotional appeal of &#8220;winning often&#8221; doesn&#8217;t match maximum-profit math<\/li>\n<li>Low-RR trading means a <strong>single losing streak<\/strong> can wipe out the entire small-win accumulation (RR = 0.5 scalpers frequently blow up after a few consecutive losses)<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Realistic RR Targets<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">People tend to think &#8220;higher RR is always better&#8221;, but in reality <strong>achievability<\/strong> matters too. Targeting RR = 10 is meaningless if the price reverses before reaching TP, dropping your win rate to a level where EV turns negative.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table>\n<thead><tr><th>Style<\/th><th>Recommended RR<\/th><th>Target Win Rate<\/th><th>Notes<\/th><\/tr><\/thead>\n<tbody>\n<tr><td>Scalping<\/td><td>0.5\u20131.0<\/td><td>60\u201370%<\/td><td>High frequency, mentally taxing<\/td><\/tr>\n<tr><td>Day trading<\/td><td>1.5\u20132.0<\/td><td>40\u201350%<\/td><td>Most common discretionary territory<\/td><\/tr>\n<tr><td>Swing<\/td><td>2.0\u20133.0<\/td><td>35\u201345%<\/td><td>Technical analysis works well here<\/td><\/tr>\n<tr><td>Long-term trend<\/td><td>3.0\u20135.0<\/td><td>25\u201335%<\/td><td>Hold overnight\/multi-day, fewer positions<\/td><\/tr>\n<\/tbody>\n<\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Computing your actual win rate and average RR from your trade history reveals which target fits your style best.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">RR and Lot Sizing Are Inseparable<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Even with the right RR ratio, <strong>inconsistent lot sizing destroys the math<\/strong>. If you target RR 2.0 but vary lots from 0.1 to 0.5 randomly, &#8220;oversized losses&#8221; mix into your results and the EV calculation falls apart.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Conversely, simply enforcing <strong>&#8220;Lot sized for 1% account risk \u2192 target RR 2.0&#8221;<\/strong> grows your capital long-term even at a 35\u201340% win rate. This is the core of money management.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Doing the lot math manually every trade isn&#8217;t realistic \u2014 automate it with a tool that computes the lot from your stop-loss line.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Automation Tool: Auto-Lots Calculation EA (Free)<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The free <strong>Auto-Lots Calculation EA<\/strong> distributed by TraderIsMe lets you draw a stop-loss line on the chart, automatically computing the right lot size from <strong>account balance \u00d7 risk %<\/strong> and placing the order. If your style targets RR 2.0, the TP can also be auto-set to 2x the stop-loss width.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For EA installation, see <a href=\"https:\/\/docs.traderis.me\/en\/docs\/free-ea-setup-guide\/\">Free EAs \u2014 Common Setup Guide<\/a>. For feature and parameter details, see <a href=\"https:\/\/docs.traderis.me\/en\/docs\/auto-lots-calculation-ea-mt5\/\">Auto-Lots Calculation EA \u2014 Features and Input Parameters<\/a>.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/docs.traderis.me\/downloads\/TraderIsMe-Auto-Lots-Calculation-EA-MT5.zip\">Download MT5 Version<\/a><\/div>\n\n\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/docs.traderis.me\/downloads\/TraderIsMe-Auto-Lots-Calculation-EA-MT4.zip\">Download MT4 Version<\/a><\/div>\n\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Summary<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What really matters for long-term FX profitability is <strong>EV, not win rate<\/strong><\/li>\n<li>Positive EV requires: Win Rate &gt; 1 \u00f7 (1 + RR)<\/li>\n<li>With RR 2.0, even a 33% win rate is profitable. With RR 0.5, you need 67%+ to stay even<\/li>\n<li>An &#8220;80% win-rate scalper&#8221; frequently earns less than a &#8220;30% win-rate trend follower&#8221;<\/li>\n<li>RR is meaningless without <strong>consistent lot sizing<\/strong> \u2014 random lots wreck the EV math<\/li>\n<li>To free your mind for entry decisions, automate lot calculation with <a href=\"https:\/\/docs.traderis.me\/en\/docs\/auto-lots-calculation-ea-mt5\/\">Auto-Lots Calculation EA<\/a><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Shifting your mindset from &#8220;raise the win rate&#8221; to &#8220;maintain positive EV&#8221; transforms FX from gambling into a <strong>mathematically viable business<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Related Articles<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/docs.traderis.me\/en\/docs\/lot-calculation-basics\/\">Lot Calculation Basics \u2014 How to Size Trades from Stop-Loss Pips and Automate It<\/a> \u2014 The prerequisite for this article<\/li>\n<li><a href=\"https:\/\/docs.traderis.me\/en\/docs\/auto-lots-calculation-ea-mt5\/\">Auto-Lots Calculation EA \u2014 Features and Input Parameters<\/a> \u2014 Manual for the EA introduced in this article<\/li>\n<li><a href=\"https:\/\/docs.traderis.me\/en\/docs\/free-ea-setup-guide\/\">Free EAs \u2014 Common Setup Guide<\/a> \u2014 How to install EAs in MT4\/MT5<\/li>\n<li><a href=\"https:\/\/docs.traderis.me\/en\/docs-category\/free-ea\/\">All Free EAs<\/a> \u2014 Complete list of TraderIsMe free EAs<\/li>\n<\/ul>\n\n","protected":false},"excerpt":{"rendered":"<p>\ud83d\udccc Key Takeaway With an RR ratio of 2.0, a win rate as low as 33% grows your capital long-term \u2014 meaning win ra &#8230; <a title=\"Risk-Reward Ratio Explained \u2014 Why Expected Value Beats Win Rate in FX\" class=\"read-more\" href=\"https:\/\/docs.traderis.me\/en\/docs\/risk-reward-ratio\/\" aria-label=\"Risk-Reward Ratio Explained \u2014 Why Expected Value Beats Win Rate in FX \u306b\u3064\u3044\u3066\u3055\u3089\u306b\u8aad\u3080\">\u7d9a\u304d\u3092\u8aad\u3080<\/a><\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"doc_category":[5],"doc_tag":[],"class_list":["post-25","docs","type-docs","status-publish","hentry","doc_category-trading-basics"],"year_month":"2026-06","word_count":870,"total_views":0,"reactions":{"happy":0,"normal":0,"sad":0},"author_info":[],"doc_category_info":[{"term_name":"Trading Basics","term_url":"https:\/\/docs.traderis.me\/en\/docs-category\/trading-basics\/"}],"doc_tag_info":[],"_links":{"self":[{"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/docs\/25","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/docs"}],"about":[{"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/types\/docs"}],"replies":[{"embeddable":true,"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/comments?post=25"}],"version-history":[{"count":2,"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/docs\/25\/revisions"}],"predecessor-version":[{"id":74,"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/docs\/25\/revisions\/74"}],"wp:attachment":[{"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/media?parent=25"}],"wp:term":[{"taxonomy":"doc_category","embeddable":true,"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/doc_category?post=25"},{"taxonomy":"doc_tag","embeddable":true,"href":"https:\/\/docs.traderis.me\/en\/wp-json\/wp\/v2\/doc_tag?post=25"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}