UPDATING WEBSITE PLEASE US ON JOIN DISCORD



  • The Importance of Risk:Reward Ratio

    The reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances.
    Step 1: calculating the RRR
    Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points .
    Then the reward risk ratio is 2:1 because 100/50 = 2.

    Reward Risk Ratio Formula
    RRR = (Take Profit – Entry ) / (Entry – Stop loss)

    When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below).

    Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades.

    Example 1: If you enter a trade with a 1:1 reward:risk ratio, your overall winrate has to be greater than 50% to be a profitable trader:
    1 / (1+1) = 0.5 = 50%

    Example 2: If you enter a trade with a 2:1 reward:risk ratio, your overall winrate has to be greater than 33% to be a profitable trader:
    1 / (2+1) = 0.33 = 33%

    Example 3: If you enter a trade with a 3:1 reward:risk ratio, your overall winrate has to be greater than 25% to be a profitable trader:
    1 / (3+1) = 0.25 = 25%

  • Img
  • Cheat Sheet for Reward:Risk Ratio and Winrate

    Winrate to Breakeven Minimum Reward:Risk Ratio
    25% 3 : 1
    33% 2 : 1
    40% 1.5 : 1
    50% 1 : 1
    60% 0.7 : 1
    75% 0.3 : 1

    Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy.

  • Sponsored Ad
  • Disclaimer

    By viewing any material or using the information within this site, you agree that it is general educational material and you will not hold anybody responsible for loss or damages resulting from the content provided here by “UFX Trend Scalper” or any of its staff or employees. Futures, options and spot currency trading have large potential rewards but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures, options or currency markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to buy/sell futures, options or currencies. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website or in any of its material. The past performances of any trading system or methodology is not necessarily indicative of future results.
    UFX Trend Scalper Disclaimer: Trading involves the risk of loss as well as the potential for profit. Please be advised that any advice provided by UFX Trend Scalper is general product advice only, and may not be suitable for everyone. Please consult your licensed financial consultant to decide if trading in Foreign Exchange is suitable for your personal financial situation.