Question 1

What is a good risk-reward ratio?

Accepted Answer

Most experienced traders aim for at least 1:2 (risking $1 to make $2). At 1:2, you only need to win 34% of your trades to break even. At 1:3, you need just 25%. The higher the R:R, the lower your required win rate — but very high R:R setups (1:5+) are rare and often have low hit rates.

Question 2

How do I calculate risk-reward before entering a trade?

Accepted Answer

Risk = entry price minus stop-loss price. Reward = target price minus entry price. Divide reward by risk. Example: buying at $10 with a stop at $9.50 (risk = $0.50) and a target of $11.50 (reward = $1.50) gives a 1:3 R:R. If the ratio doesn't meet your minimum, skip the trade.

Question 3

Is win rate or risk-reward more important?

Accepted Answer

Neither alone — it's the combination (called expectancy). A 90% win rate with 1:0.1 R:R loses money. A 30% win rate with 1:4 R:R makes money. Expectancy = (Win% × Avg Win) − (Loss% × Avg Loss). Focus on keeping this number positive over a sample of 50+ trades.

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