What is risk/reward ratio?Risk : Reward
Money you could lose : money you could make; 1:2 means risking $1 to aim for $2.
Learn “risk/reward ratio” in an animated lesson
- Forex: Pending Orders & RiskStop-Loss (SL) and Take-Profit (TP)
Set your exit plan when you open the trade: where you admit you're wrong and where you take the win, measuring risk and reward in pips.
- Risk Management & Trading PsychologyExpectancy: Win Rate Isn't Everything
A 40% win rate can make money, and an 80% win rate can still blow up. What decides the outcome is win rate combined with payoff ratio.
- Risk Management & Trading PsychologyThe Kelly Criterion: How Much to Bet
Bet too little and your money grows slowly; bet too much and volatility drags you down. The Kelly criterion finds the bet size that grows wealth fastest over the long run.
- Risk Management & Trading PsychologyLosing Streaks and the Risk of Ruin
The same profitable strategy can produce wildly different equity curves with different luck. Use a Monte Carlo simulation to run hundreds of possible futures and see how bad it can get.
- Stock Trading: Next StepsStop-Loss and Take-Profit
Decide in advance how much you'll lose before you get out and how much you'll take when you're up. Let discipline make the call.
Related terms
See how “risk/reward ratio” works for yourself with an animation you can drag and play.
Go to “Stop-Loss (SL) and Take-Profit (TP)”