What Is the Risk-to-Reward Ratio?

The risk-to-reward ratio (R:R) compares how much a trade can make with how much it risks.

Formula

R:R = (Target − Entry) ÷ (Entry − Stop)

Planned vs. realized

Planned R:R is what you aim for when you enter. Realized R:R is your average win divided by your average loss across real trades. Many traders plan 1:3 but realize 1:1.5 because they exit winners early, which is why your journal should track both.

Example

Entry 1.1000, stop 1.0980 and target 1.1060 risks 20 pips to make 60: a 1:3 risk-to-reward.

Size the trade with the position size calculator. Related: win rate, R-multiple. See the trading glossary.