Lesson 11 of 15 · Trading basics in the MyFundedCapital Terminal

What is the risk-reward ratio in trading?

Essential3 min readMyFundedCapital Research · rules as of 17 Oct 2026

Short answer

The risk-reward ratio compares what you lose if the stop hits with what you make if the take profit hits. At 1:2 you risk $50 to make $100, so you can lose more trades than you win and still break even, before costs.

01

R:R = distance to the stop : distance to the take profit. Both come from the chart.

02

At 1:2 about one winner in three breaks even before costs; at 1:1 you need one in two.

03

Set the target at the next level. A ratio you want is not a ratio the chart offers.

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.

EntryTargetStop2R1RRewardRisk
Risk 1R, reward 2R

Win rate and break-even

The ratio decides how often you need to be right just to break even, before spread and commission.

R:RWinLossBreak-even
1:1+$50−$50About one win in two trades
1:2+$100−$50About one win in three trades
1:3+$150−$50About 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.

InteractiveTry it: risk versus rewardMove the stop and the take profit to see the ratio and how often you need to win to break even.

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.

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.

Set it in the ticket

  1. Press + Stop loss and + Take profit.
  2. Enter each as a price, in points or in dollars, whichever matches how you planned it.
  3. Read the money at the stop and at the take profit, and check the ratio against your minimum.
  4. Open Order value & limits to see the commission, which comes off every result.

Quiz

Check yourself

0 / 3

1Stop 25 pips, take profit 50 pips. Which ratio?
2At 1:2, how many trades in three must win to break even before costs?
3The next resistance is 15 pips away and your stop needs 25. What is sensible?

Questions

Is a higher risk-reward ratio always better?

No. A far target is hit less often. A ratio is only useful together with the win rate it produces, which you measure over many trades.

Do costs change the ratio?

Yes. Spread and commission reduce every win and add to every loss, so a 1:1 plan needs slightly more than one win in two to break even.

Related lessons

  1. Where should you place a stop loss?Trading basics in the MyFundedCapital TerminalEssential3 min
  2. How much should you risk per trade on a funded account?Risk & rulesEssential3 min
  3. How do you place your first trade step by step?Trading basics in the MyFundedCapital TerminalBeginner3 min

Rules shown here come from the help center and the live rulebook; your program terms apply.

Bogdan Rubtsov, CEO and founder of MyFundedCapital

Bogdan Rubtsov

CEO & Founder

“Traders shouldn’t have to beg for capital or guess the rules. So every MyFundedCapital program has its own rulebook, and you can read it before you pay. We ask one question: can you manage risk? If you can, you’re welcome here. If a rule ever feels unclear, that’s ours to fix.”

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