Calculate your R:R ratio, potential profit, and the win rate you need before entering any trade.
A risk-to-reward ratio compares how much you stand to lose versus how much you could gain on a trade. To calculate it, divide the distance from your entry to your take profit by the distance from your entry to your stop loss. A 1:2 ratio means you risk $1 to make $2.
Divide the distance from your entry price to your take profit by the distance from your entry price to your stop loss. For example, if you buy at $100 with a stop loss at $95 and a take profit at $115, your risk is $5 and your reward is $15. That gives you a 1:3 risk to reward ratio.
Most professional traders aim for a minimum of 1:2. This means the potential reward is at least twice the risk. A 1:2 ratio lets you be wrong on half your trades and still break even. A 1:3 or higher gives you even more room for losing trades.
A 1:1 ratio means you need to win more than 50% of your trades to make money. It can work with a high win rate strategy like scalping, but most traders prefer 1:2 or higher because it gives more margin for error.
The higher your risk to reward ratio, the lower your win rate needs to be. At 1:1 you need over 50% wins. At 1:2 you need 33%. At 1:3 you only need 25%. This is why many profitable traders have a low win rate but a high R:R.
Most professional traders use a minimum of 1:2 and prefer 1:3 on their best setups. Some swing traders go as high as 1:5 on longer timeframe trades. The key is matching your R:R to your strategy and win rate.
It depends on your strategy. If you have a very high win rate (above 60%), a 1:1.5 ratio can still be profitable. But for most setups, if the R:R is below 1:2, the trade may not be worth the risk. Always check the math before entering.
Yes. TradeZella automatically calculates your risk-to-reward ratio on every trade you log. It tracks your planned R:R versus your actual R:R, so you can see if you are cutting winners short or letting losers run. You can also filter your trade history by R:R to find which setups give you the best ratio over time.
