Risk/reward compares how much you plan to gain on a winning trade versus how much you risk if stopped out. If you risk $50 to target $100, that is often described as a 1:2 risk/reward (two dollars of reward per one dollar of risk), sometimes written as “2R” reward relative to 1R risk.
Ratio alone does not make an edge
A high reward multiple sounds attractive, but if wins are rare, expectancy can still be negative. You need both win rate and average win/loss to judge robustness.
Tooling
Use the risk/reward calculator to translate entry, stop, and target prices into a ratio quickly.
For a visual matrix of win rate vs payoff, see the win rate vs risk/reward matrix.
Translating charts into R-multiples
Once entry, stop, and first target are defined, measure risk in price units and reward the same way. The ratio is a planning summary, not a guarantee that price will cooperate with your target.
Staged targets and partials
If you scale out, define how partial exits change the effective R still at risk. Many journals underestimate reward because they book partials mentally as “full win” too early.
- Write planned partials before entry.
- Recompute R after each partial.
- Keep the worst-case stop loss unchanged unless rules say otherwise.
Pairing ratio with location
Strong R numbers on paper mean little if the stop sits in random noise. Combine ratio discipline with structure: invalidation should make sense on the chart, not only in the spreadsheet.