Glossary › risk-to-reward ratio
Trading glossary · risk
risk-to-reward ratio
Comparing how much you could lose with how much you could win on a trade, like risking 1 to win 2.
The fuller meaning
The planned reward divided by the planned risk, often written as reward-to-risk or in R. Higher ratios need a lower win rate to break even, but targets must stay realistic; below 1, a careful trader usually skips, and fees and spread shrink the real reward.
risk-to-reward ratio, also called reward-to-risk, risk to reward, reward to risk.
Related words
1% rule · ATR stop · average loss · average win · breakeven · breakeven win rate · correlation · daily loss limit · drawdown · equity curve