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# Risk-Reward Ratio: What It Is and What Win Rate You Need
- URL: https://www.flltlt.com/blog/risk-reward-ratio/
- Published: 2026-10-27T15:22:09.000Z
- Updated: 2026-10-27T17:39:48.000Z
- Description: How to calculate risk-reward, the break-even win rate for 1:1, 1:2 and 1:3, and why bigger targets aren’t always better.
- Author: Fulltilt
- Tags: Trading Glossary, Risk Management

**The short answer:** The risk-reward ratio compares how much a trade can lose to how much it can make. A trade risking 10 points to make 20 points is 1:2\. Higher reward per unit of risk means you can be right less often and still make money: at 1:2, you break even winning about 33% of the time. But bigger targets get hit less often, so the ratio only matters together with your win rate.

## Key takeaways

- Risk-reward = distance to stop : distance to target.
- Break-even win rate = 1 ÷ (1 + reward multiple).
- 1:1 needs over 50% wins. 1:2 needs over 33%. 1:3 needs over 25%.
- Bigger targets usually mean a lower win rate.
- The target should come from the chart, not from a ratio you want.

## How do you calculate risk-reward?

**Measure the stop and the target from your entry.** Long MNQ at 20,000, stop at 19,990, target at 20,020: you risk 10 points to make 20\. That's 1:2.

![Break-even win rate formula: one divided by one plus the reward multiple. At 1:2, the break-even win rate is 33.3 percent.](https://storage.ghost.io/c/a0/84/a0847890-aa24-4d5e-b6dd-8a7b42022bb3/content/images/2026/10/breakeven-formula.png)

## What win rate do you need?

| Risk : reward | Break-even win rate |
| ------------- | ------------------- |
| 1 : 0.5       | 66.7%               |
| 1 : 1         | 50.0%               |
| 1 : 1.5       | 40.0%               |
| 1 : 2         | 33.3%               |
| 1 : 3         | 25.0%               |

These are before commissions and slippage, which raise the bar a little. To see how win rate and reward combine, read about [expectancy in risk management](https://www.flltlt.com/blog/risk-management-for-funded-traders/).

## Is a higher risk-reward always better?

**No.** A 1:5 target sounds great, but if price rarely gets there, your win rate drops and your [losing streaks](https://www.flltlt.com/blog/how-much-to-risk-per-trade/) get longer. That's dangerous in a prop firm account with a tight drawdown. Many day traders work in the 1:1 to 1:2 range because those targets are realistic within a session.

## Where should the target come from?

**From the chart.** The next [resistance level](https://www.flltlt.com/blog/support-and-resistance/), the prior high, a range projection. If the nearest logical target is only half your risk away, the trade may not be worth taking. Don't stretch the target to make the ratio look better. Price doesn't know your ratio.

> **From the desk** Indy trades MNQ and records results in points on [Day Trader Income](https://www.daytraderincome.com/). Points make risk-reward easy to track honestly: average winner in points, average loser in points, and the win rate. That's the whole scorecard.

## The bottom line

Risk-reward tells you how often you need to be right. Measure it from a chart-based stop and target, know the break-even win rate, and judge it together with your real win rate, not on its own.

## FAQ

### What is the risk-reward ratio?

It compares how much a trade can lose with how much it can make. Risking 10 points to make 20 is a 1:2 risk-reward ratio.

### What is a good risk-reward ratio for day trading?

There is no single best ratio. Many day traders work between 1:1 and 1:2 because those targets are realistic within a session. It must be judged together with win rate.

### How do I calculate break-even win rate?

Divide 1 by 1 plus the reward multiple. At 1:2, the break-even win rate is 1 ÷ 3, or about 33.3%.

### Is a 1:3 risk-reward better than 1:1?

Not automatically. Larger targets are hit less often, which lowers your win rate and lengthens losing streaks.