Risk to reward

Risk to reward compares the distance to your stop with the distance to your target.

Risking 1 to make 2 means the target is twice as far away as the stop. A further target is reached less often, in exact proportion, on a market that moves at random.

The ratio on its own is neither good nor bad. It describes the shape of the trade, not whether it works.

Also called: R:R, risk reward ratio

A definition, not financial advice. Trading carries a risk of loss.