Step 1 of 5
How to calculate it
Take an EURUSD buy at 1.0840 with the stop at 1.0815 and the take profit at 1.0890. The stop is 25 pips away and the target 50 pips. The ratio is 25 : 50, or 1:2.
In dollars the sum is the same. At 0.20 lots and $10 per pip per lot, the stop costs $50 and the target pays $100. The order ticket shows both: the money at the stop and the money at the take profit, as soon as you add them.
Traders often describe results in R, where 1R is the amount risked. A win at 1:2 is +2R; a full stop is −1R.
Step 2 of 5
Win rate and break-even
The ratio decides how often you need to be right just to break even, before spread and commission.
| R:R | Win | Loss | Break-even |
|---|---|---|---|
| 1:1 | +$50 | −$50 | About one win in two trades |
| 1:2 | +$100 | −$50 | About one win in three trades |
| 1:3 | +$150 | −$50 | About one win in four trades |
A higher ratio needs fewer winners, but price reaches a far target less often. There is no free lunch: the ratio and the win rate trade off against each other. What matters is the pair, measured over many trades in your journal.
The ratio and the win rate together give your expectancy: win rate × average win − loss rate × average loss. With 40% winners at +2R and 60% losers at −1R, that is 0.8R − 0.6R = +0.2R per trade before costs. Costs shift the real ratio too: with a 10-pip stop and a 20-pip target, 1 pip of spread and commission turns the planned 1:2 into about 1:1.7.
Step 3 of 5
A realistic target
The take profit should come from the chart, usually the next resistance for a buy or the next support for a sell. If you buy at 1.0840 and resistance sits at 1.0865, the honest target is about 25 pips: a 1:1 trade with a 25-pip stop.
You have three choices then: accept 1:1, look for a better entry that tightens the stop, or skip the trade. Moving the target past resistance to “make” 1:2 changes the number, not the odds. Many traders set a minimum, such as 1:1.5, and skip anything below it.
Write the minimum into your plan before the session. In the moment, almost any trade can be made to look like 1:2 by moving one line on the chart.
Step 4 of 5
R:R and your dollar limits
On a $10,000 1-Step Challenge account at 0.5% risk, 1R is $50. The daily loss limit is $500, so it takes 10 full stops in a row to reach it, and 20 to use the whole 10% overall loss limit.
A fixed 1R keeps those numbers predictable. Raising the size after a loss to win it back at 1:2 changes 1R mid-plan, and it is one of the quickest ways to reach a limit. Keep 1R fixed for the week and judge the ratio in your journal, not trade by trade.
Step 5 of 5
Set it in the ticket
- Press + Stop loss and + Take profit.
- Enter each as a price, in points or in dollars, whichever matches how you planned it.
- Read the money at the stop and at the take profit, and check the ratio against your minimum.
- Open Order value & limits to see the commission, which comes off every result.
Recap
- R:R = distance to the stop : distance to the take profit. Both come from the chart.
- At 1:2 about one winner in three breaks even before costs; at 1:1 you need one in two.
- Set the target at the next level. A ratio you want is not a ratio the chart offers.
Check yourself
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Lesson complete
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