Risk-to-Reward Ratio

Learn Risk-to-Reward Ratio — part of our Risk Management series on Trading Bite. Free trading education for Pakistan, India & Gulf traders. Educational use only; not financial advice.

· 3 min read

Comparing potential loss vs potential gain

Risk-to-reward (R:R) compares stop distance to take-profit distance.

If you risk 50 pips to make 100 pips, R:R = 1:2.

You do not need to win every trade if reward outweighs risk over many trades — but win rate and R:R must be realistic together.

Reward 2RRisk 1R

Example: 40% win rate at 1:2 R:R can still be breakeven or better before costs — maths matters more than hype.