Trading & signals glossary
What is the risk-reward ratio?
The risk-reward ratio compares what you risk on a trade with what you stand to make: the distance to the target divided by the distance to the stop. A 1:2 ratio means you’re aiming for $2 for every $1 at risk. On its own it doesn’t tell you whether you’ll make money; that also depends on your win rate.
How it works
Before the trade: distance from entry to target ÷ distance from entry to stop. That’s the planned ratio.
After many trades: average win ÷ average loss. That’s the real ratio, and it’s usually worse than the planned one.
A high ratio with a low win rate can still make money; a low ratio needs a high win rate.
How to calculate it
ratio = |target − entry| ÷ |entry − stop|
breakeven win rate = 1 ÷ (1 + ratio)
At 1:2 you need to win more than 33% of the time; at 1:0.5, more than 67%.
Example: two gold signals
- Signal A: entry 4,200, stop 4,190, target 4,220 → 20 ÷ 10 = a 1:2 ratio.
- Signal B: entry 4,200, stop 4,180, target 4,210 → 10 ÷ 20 = a 1:0.5 ratio.
- A needs to win more than 33% of the time to break even; B, more than 67%.
Our data · Verpips
What we measure in signal channels
- 1:0.84
- median real ratio
- 54%
- win rate needed at that ratio
- 44%
- median measured win rate
win rate needed at the real median risk/reward
median measured win rate
Across the 18 channels we measure, the median real ratio is 0.84: on average, their winners make 0.84 times what their losers lose. At that ratio you need to win more than 54% of the time, and the median measured win rate is 44%.
Verpips data as of Oct 7, 2026, measured against the real price. See how we measure and the channel directory.
Types and variations
- Planned
- The one on the signal: target versus stop.
- Realized
- Average win versus average loss, after the trades are done.
- Per target
- With multiple TPs, each target has its own ratio.
Why it matters when choosing a signal channel
Lots of channels advertise 1:3 ratios based on TP3, which almost never gets hit. The ratio that matters is the realized one, combined with the win rate: together they make up expectancy.
Common traps
- Advertising the ratio of the farthest target.
- Low ratios hidden behind a high win rate.
- Moving the stop after entry, which changes the real ratio.
Key takeaways
- ✓Ratio = target ÷ stop (in distance).
- ✓The realized ratio is usually worse than the planned one.
- ✓Ratio and win rate go together: one without the other tells you nothing.
- ✓With a ratio below 1, you have to win more than half the time.
FAQ: risk-reward ratio
What’s a good risk-reward ratio?
There’s no good one on its own: it depends on your win rate. 1:2 with a 40% win rate makes money; 1:0.5 needs more than 67%.
What does 1:3 mean?
The target is three times farther from the entry than the stop: you’re aiming for $3 for every $1 at risk.
Are risk-reward ratio and R the same thing?
They’re related: a target with a 1:2 ratio is worth +2 R if it gets hit.
Channel by channel
See these numbers for each channel, not as an average.
With a free account you see each channel’s result in R, its drawdown, and what it announced versus what actually happened.