The risk-reward ratio compares what a trade could lose with what it could gain: the distance from entry to the stop loss against the distance from entry to the take profit. A stop 50 pips away and a target 100 pips away is a risk-reward of 1:2 — the trade risks one unit to make two. It is a plan, fixed at entry; what the trade actually earns is measured afterwards as an R multiple.
What is the risk-reward ratio formula?
Reward ÷ risk = |take profit − entry| ÷ |entry − stop loss|
The result is usually written as 1 : reward, so a figure of 2 becomes 1:2. Some platforms print it the other way round, as reward : risk, or just as 2.0 — check which side is which before comparing. Distances in price, pips or money give the same ratio, because the lot size cancels out.
Worked example
You buy EURUSD at 1.1000 with the stop at 1.0950 and the target at 1.1100. Risk is 0.0050 (50 pips), reward is 0.0100 (100 pips), so the ratio is 100 ÷ 50 = 1:2. If you size the trade to risk $200, hitting the target pays about $400 before costs.
How does risk-reward relate to win rate?
They trade off against each other. A target further away pays more but is reached less often, so a better ratio usually comes with a lower win rate. What matters is the pair: at 1:2 you need to win more than a third of the time to break even, at 1:1 more than half. The full table is on the break-even win rate page. A high ratio on its own proves nothing if the target is almost never reached.
Why do planned and realised reward differ?
- Early exits. Closing at the first pullback turns a planned 1:2 into a realised 0.8R.
- Partial closes and trailing. Taking part of the position at 1R and trailing the rest gives a result that sits somewhere between the levels, not exactly on the target.
- Stops that move. A stop moved further away after entry raises the real risk, so the original ratio no longer describes the trade.
Risk-reward in ApeX Journal
Each trade's Trade Detail shows its planned ratio as 1 : reward, worked out from the stop loss and take profit the trade opened with. Where the broker history has no level — for example a virtual stop held by ApeX Trade Manager MT5 — the Journal uses the trade manager's plan, and failing that a level you typed in yourself. If either the stop or the target is missing, the ratio stays blank instead of being guessed. The same page also gives the realised R multiple, so the plan and the outcome can be read together.
Questions
What is a good risk-reward ratio?
Many traders aim for at least 1:2, because it lets them lose more often than they win and still come out ahead. But a ratio is only good if the target is realistic for the market and timeframe; a 1:5 target that is almost never reached is worse than a 1:1.5 target that usually is.
What is the difference between risk-reward and R multiple?
Risk-reward is the plan: how far the target is compared with the stop, set before entry. R multiple is the result: how much the closed trade made or lost compared with what it risked. A 1:2 plan can end at +2R, at −1R, or anywhere in between.
Does the lot size change the risk-reward ratio?
No. A bigger lot makes both the possible loss and the possible gain bigger by the same factor, so the ratio stays the same. Lot size decides how much money one unit of risk is; the stop and target decide the ratio.