The risk-reward ratio compares the target distance with the stop distance. From it you can read how often you must be right just to break even, and whether your win rate is enough.
RR = |target − entry| ÷ |entry − stop|.
Break-even win rate = 1 ÷ (1 + RR).
Expectancy per 1R = win rate × RR − (1 − win rate).
| RR | Break-even win rate |
|---|---|
| 1 : 1 | 50% |
| 1 : 1.5 | 40% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
Not by itself. A larger RR needs a lower win rate to break even, but a farther target is reached less often. What matters is expectancy: your real win rate times RR minus the losses.
Compute a blended RR from each target's share. Two targets with 50% at 1R and 50% at 3R equal 1:2 if both are hit; if only the first is hit and the rest is stopped out, the result differs. A journal recording R per trade shows the real figure.
RR sets the shape of the trade; position size sets what 1R is in money. Both come from the same stop distance; see the position size calculator.