Think in R, not in dollars
Professionals rarely talk about a trade in money. They talk in R - multiples of the amount risked. A trade is "+2R" or "-1R". It sounds like jargon until you notice what it does: it strips out account size and makes every trade comparable, so a run of results becomes a measurable system instead of a series of feelings.
The break-even win rate decides everything
At 1:1 you need to be right more than half the time. At 1:3 you can be wrong three times out of four and still grind forward. This is why "I am right most of the time" is not an edge on its own - a trader who wins 70% of trades at 1:0.3 is losing money, and a trader who wins 35% at 1:3 is not.
Be honest about the target
The easiest way to fake a good ratio is to set a target the market will not reach. A 1:5 trade that fills 5% of the time is worse than a 1:1.5 that fills half. Place the target where price has actually turned before - prior swing, zone edge, Fibonacci extension - and let the ratio be what it is.
Then size it and stress-test it
Once the ratio is honest, turn it into a position with the position size calculator, and see what a few hundred trades at that expectancy really look like in the risk of ruin simulator. Fees matter too: compare them on the fee calculator.
The break-even table, memorised once
| Reward : risk | Break-even win rate | At 40% wins | At 50% wins |
|---|---|---|---|
| 1 : 0.5 | 66.7% | −0.40R | −0.25R |
| 1 : 1 | 50.0% | −0.20R | 0.00R |
| 1 : 2 | 33.3% | +0.20R | +0.50R |
| 1 : 3 | 25.0% | +0.60R | +1.00R |
| 1 : 5 | 16.7% | +1.40R | +2.00R |
Read the 1:1 row and the 1:3 row together. Same trader, same 40% win rate, and the difference between a slow bleed and a compounding account is entirely where the target was placed.
What +0.2R actually pays
Expectancy sounds abstract until it is money. At 1% risk on a $10,000 account, 1R is $100. An expectancy of +0.2R is $20 a trade, which is $2,000 over a hundred trades, before fees. That is roughly a year of patient swing trading for a 20% return, and it is what a genuinely good retail edge looks like. Anyone promising more per month is selling something.
Why most people overstate their win rate
Memory edits. The two trades anyone can recall are the biggest winner and the most painful loss, and neither is representative. The only fix is a written record: the trading journal computes expectancy from every closed trade instead of from the ones you remember, and groups them by setup so you can see which category is quietly negative.
Then stress-test it
A positive expectancy says the system works across many trades. It says nothing about whether you survive the unlucky stretch on the way there. Run your exact numbers through the risk of ruin simulator, and size every entry with the position size calculator so that the stop costs what you planned.
Frequently asked
What is a good risk-to-reward ratio?
There is no universally good ratio, only one that fits your win rate. At 1:1 you need to win more than 50% of trades; at 1:2 you need 33.3%; at 1:3 you need 25%. The useful question is not whether 1:2 is good but whether your setup actually reaches a 1:2 target often enough, which the break-even win rate in this tool answers directly.
How do I calculate break-even win rate?
Break-even win rate = 1 ÷ (1 + R), where R is reward divided by risk. A 1:2 trade gives 1/(1+2) = 33.3%. Below that win rate the system loses money over time regardless of how good any single trade feels.
What is expectancy in trading?
Expectancy is the average result per trade measured in R, units of the amount risked. The formula is (win rate × R) − (1 − win rate). A result of +0.35R means every trade is worth about a third of what it risks. Positive expectancy with small risk per trade is the minimum definition of an edge.
Is a high win rate better than a high reward-to-risk ratio?
Neither on its own tells you anything. A trader winning 70% at 1:0.3 is losing money; a trader winning 35% at 1:3 is compounding. What matters is the product of the two, which is expectancy. High win rates feel better and often come from strategies that cut winners early and hold losers, a shape that eventually produces one very large loss.
Should I move my stop to break even?
It changes the ratio you calculated here. Moving to break even cuts losses to zero on trades that half-worked, but it also turns winners into scratches when price retests your entry, which quietly lowers your win rate. Test it as a rule across many trades rather than deciding in the moment on a trade you are nervous about.
How do I set a realistic target?
Place it where price has actually turned before: a prior swing, the far edge of a range, a measured move, a Fibonacci extension. Inflating the target to make the ratio look acceptable improves the number and nothing else. A 1:5 trade that fills 5% of the time is worse than a 1:1.5 that fills half the time.
Do fees change the ratio?
Yes, and they hit the risk side harder because they are paid whether you win or lose. On a tight stop the round-trip fee can be a meaningful fraction of the amount risked, which lowers real expectancy below the number shown here. Price them on the fee calculator before trusting a thin edge.
How many trades before I can trust my win rate?
Around thirty before the shape is suggestive and closer to a hundred before it is evidence. Below that, luck dominates. Most traders type an optimistic win rate into tools like this one, which is why the risk of ruin simulator is worth running with a figure five points lower than you believe.
Trading is high risk and most retail accounts lose money. This tool is education only, not financial advice.