The honest answer is that no ratio is good on its own. A risk-reward ratio is only good relative to the win rate you can actually achieve while using it, and that relationship is arithmetic rather than opinion. Here is the table, the formula behind it, what costs do to it, and the two ways traders quietly break it.
What is in here
Risk one unit, target R units. The win rate at which you end up flat, before costs:
| Risk-reward | Break-even win rate | What it means in practice |
|---|---|---|
| 1:0.5 | 66.7% | Two out of three must win just to stand still. Very hard to hold for long. |
| 1:1 | 50.0% | A coin flip with costs on top, which means a coin flip that loses. |
| 1:1.5 | 40.0% | The most common realistic zone for intraday work. |
| 1:2 | 33.3% | Two losers out of three is still flat. This is the number most traders misjudge. |
| 1:3 | 25.0% | Three losers out of four is flat, and losing streaks get long. |
| 1:4 | 20.0% | Swing territory. Requires patience the account rarely gets. |
| 1:5 | 16.7% | Rarely reached in full, because the exit usually happens first. |
Break-even is not a target, it is a floor. Clearing it by a point or two is statistically indistinguishable from not clearing it over any sample you will personally trade.
Expectancy per trade, in units of risk:
where W is the win rate as a decimal and R is the reward-to-risk multiple. Set E to zero and solve:
That is the whole table. At R = 2, W = 1/3. At R = 3, W = 1/4. It is worth committing to memory, because it is the fastest way to evaluate any claim anyone makes about a strategy. A "90 percent win rate" system running at 1:0.2 needs 83.3 percent just to break even, which reframes the headline considerably.
A win rate without its risk-reward ratio is not a statistic. It is a decoration.
Spread, commission, slippage and financing are all paid regardless of outcome. Express the round-trip cost as c, a fraction of the money you were risking, and the threshold becomes:
With costs worth 10 percent of your risk per trade, which is ordinary for retail on a modest stop:
| Risk-reward | Before costs | With c = 0.10 | With c = 0.25 |
|---|---|---|---|
| 1:1 | 50.0% | 55.0% | 62.5% |
| 1:1.5 | 40.0% | 44.0% | 50.0% |
| 1:2 | 33.3% | 36.7% | 41.7% |
| 1:3 | 25.0% | 27.5% | 31.3% |
| 1:4 | 20.0% | 22.0% | 25.0% |
The important structural point: c is a function of your stop distance, not of your account size. A 2 pip round-trip cost is 4 percent of a 50 pip stop and 40 percent of a 5 pip stop. This is why scalping needs a far higher hit rate than the textbook numbers suggest, and why the same strategy can be profitable on a four hour chart and unprofitable on a one minute chart with nothing else changed.
Run your own version at the break-even win rate calculator. It is free, requires no account, and nothing leaves your browser.
The obvious move after seeing the table is to widen every target. It does not work, for a reason worth stating precisely: a target further away is hit less often. Push from 1:2 to 1:4 and the break-even threshold falls from 33.3 to 20 percent, but your actual hit rate falls too, often by more than the threshold did. Whether the trade is an improvement depends on which fell faster, and the only way to know is your own recorded data.
Three second-order effects that make high ratios harder to hold than the arithmetic suggests:
This is where most plans die. You plan 1:3. Price runs to 1:1, you move the stop to break-even, price retraces, you are out flat. Next trade, same thing, but you take partial profit at 1:1 and the rest stops out at break-even. Your losers, meanwhile, are still full losers, because nothing interferes with a trade going against you.
Your journal says 1:3. Your account is trading something closer to 1:1 with the upside amputated. At 1:1 you need 50 percent, not 25, and you have been benchmarking yourself against the wrong line the whole time.
The fix is not "never move a stop". It is to measure the realised ratio: total profit on winners divided by total loss on losers, over your last fifty trades. Compare that number to the one in your plan. If it is materially lower, either stop interfering or lower the planned ratio to match what you actually do, and check the threshold for that ratio instead.
This is also the single most useful thing to demand from any analysis, human or machine: a stop level that is justified by structure and a target that is reachable, so the ratio is a consequence of the read rather than a number attached afterwards. When it returns a trade plan, ours aims to provide both plus an invalidation condition; it may instead return WAIT. Measured results are published with the sample size.
There is no universal answer. A ratio is good when your real, cost-adjusted win rate clears the break-even line for it with margin. That line is 1 divided by (1 plus the ratio).
33.3 percent before costs, around 36.7 percent with costs worth 10 percent of your risk. Aim several points above that to be meaningfully profitable rather than flat.
Only with the win rate that comes with it, typically 25 to 40 percent, and the long losing streaks that go with it. Raising the ratio does not add edge, it reshapes the same edge.
The threshold becomes (1 plus c) divided by (1 plus R), where c is the round-trip cost as a fraction of risk. Costs hurt most at tight stops.
Early exits. Break-even stops and partial profits cap the winners that pay for the losers, while the losers stay full size. Measure total winner profit divided by total loser loss and use that ratio, not the planned one.
Two free tools, no account needed and nothing leaves your browser: the break-even win rate calculator and the risk-reward calculator. If you want a second opinion on whether the stop and target on a chart are justified in the first place, that is what Tickrify does.
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Nothing on this page is financial advice. Trading involves substantial risk of loss. Tickrify provides analysis, not signals, and the final call is always yours.
