What the ratio is
The distance from entry to target divided by the distance from entry to stop. A trade risking 50 pips to make 100 is two to one. It says nothing about whether the trade will work; it says what happens if it does.
The win rate it demands
This is arithmetic, not opinion. At one to one you need to win more than half the time to break even. At two to one, a third. At three to one, a quarter. Any ratio implies a required win rate of 1 divided by (1 + ratio), and no amount of skill changes it.
Why a high win rate proves nothing
A strategy winning ninety percent of the time at one to five is losing money. Every winner returns a fifth of what a loser costs, so ten trades produce nine small wins and one loss that erases them. Win rate and ratio are only meaningful together.
Costs raise the bar
The break-even win rate assumes no spread, no commission and no swap. Real costs push the requirement higher, and the more often a strategy trades, the further they push it.
In short
| Ratio | Reward distance ÷ risk distance |
|---|---|
| 1:1 needs | Over 50% wins |
| 2:1 needs | Over 33.3% wins |
| 3:1 needs | Over 25% wins |
Common questions
What ratio should I aim for?
Whichever one your record actually achieves. The useful comparison is your own win rate against the requirement for your own ratio, which is what the win rate calculator shows side by side.
Is a 1:1 strategy always bad?
No. It needs a win rate above half, which some strategies genuinely have. It is only bad if the win rate does not clear the bar, and that is a measurement.
How do I improve my ratio?
Usually by not cutting winners early rather than by setting bigger targets. The journal shows which is happening: if winners are consistently closed well before the target, the ratio in your record is lower than the one you thought you were trading.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.