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.

Target · 4,220+2Entry · 4,2000Stop · 4,190−11:2 ratio → you risk $10 to make $20

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

  1. Signal A: entry 4,200, stop 4,190, target 4,220 → 20 ÷ 10 = a 1:2 ratio.
  2. Signal B: entry 4,200, stop 4,180, target 4,210 → 10 ÷ 20 = a 1:0.5 ratio.
  3. 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
54%

win rate needed at the real median risk/reward

44%

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.