What risk-to-reward means
Risk-to-reward (R:R) compares what you stand to lose against what you stand to gain on a trade. A 1:3 R:R means you're risking ₹1 to make ₹3 — your target is three times as far from entry as your stop-loss.
You set it before entering, from the chart: stop where your idea is wrong, target where it's proven right. The ratio between those two distances is your R:R.
The break-even win rates to memorise
Each R:R has a win rate at which you simply break even (before fees):
- 1:1 — you need to win 50% of the time.
- 1:2 — you need to win about 33%.
- 1:3 — you need to win just 25%.
- 2:1 (reward smaller than risk) — you need to win about 67%.
This is why professionals obsess over R:R: at 1:3, you can be wrong three times out of four and still not lose money.
Why win rate alone is misleading
A high win rate feels good but says nothing about size. A trader who wins 70% of trades but lets losers run bigger than winners is on a slow path to ruin.
Track both together. A journal that reports win rate and R:R side by side — and computes your expectancy from them — tells you whether your system actually makes money, not just whether it feels like it does.