Risk Reward Ratio vs Win Rate: The Break-Even Table Every Trader Needs

Win rate and risk reward ratio are two halves of one equation. This guide gives the break-even formula, a complete break-even table, expectancy worked examples, the effect of trading costs, and a data-driven way to choose targets.

In this guide

1. 1. Two Halves of One Equation
2. 2. The Break-Even Win Rate Formula
3. 3. The Break-Even Table: 1:0.5 to 1:5
4. 4. From Break-Even to Expectancy
5. 5. How Fees and Slippage Change the Math
6. 6. Losing Streaks Are Normal: The Probabilities
7. 7. How to Choose a Target With Your Own Data
8. 8. Partial Profits, Breakeven Stops and Trailing
9. 9. Strategy Styles and Their Typical Profiles
10. 10. Five Myths About Risk Reward
11. 11. Frequently Asked Questions

FAQ

What is a good risk reward ratio?

There is no single good ratio. A ratio is good only relative to your win rate. At 1:2 you need to win more than about 33% of trades to break even before costs; at 1:1 you need more than 50%. Choose the combination your strategy actually achieves in a large sample, after fees.

How do I calculate the break-even win rate?

Use break-even win rate = 1 / (1 + R), where R is your reward-to-risk ratio. For a 1:2 ratio, R is 2, so break-even is 1/3, or 33.3%.

Can I be profitable with a win rate below 50%?

Yes. If your winners are sufficiently larger than your losers, a win rate below 50% can be profitable. At a 1:3 ratio, you only need to win above 25% of trades before costs.

What is the difference between expectancy and win rate?

Win rate is only the frequency of winners. Expectancy combines win rate with the size of winners and losers to give the average result per trade in R. Expectancy is the number that determines long-run profitability.

How do fees affect my risk reward ratio?

Fees and slippage shrink winners and enlarge losers, so your effective reward-to-risk ratio is lower than planned and your break-even win rate is higher. The effect is biggest on small targets and tight stops.