Risk-to-reward ratio

Risk & Position Sizing

Comparing risk to target

Risk-to-reward compares what you're risking to what you're targeting. A 1:2 ratio means risking $1 to make $2. Many trading plans set a minimum of 1:2 or 1:3 before a trade even qualifies.

A filter, not just a label

A strict minimum R:R filter means walking away from setups that look fine directionally but don't offer enough reward for the risk involved, even if they'd probably still win.

Wins covering more than one loss

A good risk-to-reward ratio doesn't guarantee a winner. It just means that when you do win, the size of that win comfortably covers more than one loss.