also: RR ratio, R:R, reward-risk ratio, risk-reward, reward-to-risk
The ratio of potential profit to potential loss on a single trade, calculated as take-profit distance divided by stop-loss distance. It fixes the win rate a strategy needs in order to break even.
How much a trade can make against how much it can lose, chosen before it opens. On its own the number says nothing about whether a strategy is any good — it only says how often that strategy has to be right.
Risk/reward and win rate are two halves of one sentence, and quoting either half alone is how misleading EA marketing works. Once you fix the ratio, arithmetic rather than opinion decides the win rate a strategy must clear to break even.
Risk/reward = Take-profit distance ÷ Stop-loss distance Measure both distances from the intended entry price in the same units — pips or points, never one of each. The companion formula matters more in practice: breakeven win rate = 1 ÷ (1 + risk/reward). Spread and commission widen the loss and shorten the gain, so the real breakeven always sits above the arithmetic one.
No single number describes a strategy. These metrics change how this one should be read.
An EA enters at 150.00 with a stop 20 pips away and a target 40 pips away. The ratio follows from the two distances, and the breakeven win rate follows from the ratio.
Give the same EA a 40-pip stop and it needs half its trades instead. Nothing about the entry logic changed.
Calculation 40 ÷ 20 = 2.0 · 1 ÷ (1 + 2.0) = 0.333
Result Risk/reward 2:1 — the strategy must win one trade in three to break even
A risk/reward ratio only means something beside the win rate measured over the same trades. Read the pair, and read it on realised results rather than on declared settings.
| Range | What it means |
|---|---|
| Quoted without a win rate | Says nothing. Any ratio can belong to a profitable or an unprofitable strategy; only the pair decides which. |
| Declared ratio far above the realised one | The strategy never reaches its targets. A trailing stop, a time exit or manual intervention closes trades short of the take-profit. |
| Win rate comfortably above the breakeven the ratio implies | The margin between the two is the strategy edge in its clearest form. |
| Win rate within a few points of breakeven | Costs alone can erase it. Spread and commission push the breakeven line upward, and slippage pushes it further. |
| Ratio quoted from inputs on a symbol with a wide minimum stop distance | Check what the broker accepted. A stop the server refuses never reaches the market at the distance the input claims. |
Every EA listing here states its stop and target rules and publishes the full closed-trade ledger, so a reader can compare the declared ratio against the realised one instead of taking either on trust.
A 10:1 ratio with a 5% win rate loses money steadily. The ratio only sets the bar; the win rate decides whether the strategy clears it, and the two move in opposite directions as the target travels further out.
A declared ratio needs a fixed stop and a fixed target, and across the 24 records in our exit-shape study only 7 clear that bar on both sides at once. The median record keeps 83.78% of its losing exits within 2% of that symbol's median losing distance, but only 26.30% of its winning exits. For most records the denominator behaves like a constant and the numerator behaves like a distribution.
Pushing a take-profit further away improves the ratio on paper without improving the trade. Only the ratio in force at the moment of entry describes a decision anybody actually made.
Truncate each of those same 24 records at its own middle winner and 62.83% of gross profit survives at the median — so the missing 37% lived entirely in winners larger than the middle one. A tidy 2:1 target buys a predictable ratio by handing that 37% back, which is a fair trade only when you know you are making it.
Costs subtract from the win and add to the loss, so they hit both sides of the fraction. On short-distance scalping settings they can turn a 1.5:1 ratio into something close to 1:1.
A 2:1 collected over minutes and a 2:1 collected over a week are not equivalent. The longer trade ties up margin, carries swap and takes overnight gap risk that the ratio never describes.
MetaTrader 5 never prints a risk/reward row, which is why so few EA listings quote one. The Strategy Tester gives you the ingredients instead: profit factor and the percentage of profitable trades. Multiply the profit factor by (1 − win rate) and divide by the win rate, and you have the realised reward-to-risk of that run — the average winner measured against the average loser, expressed in the units the report already uses.
Run that on two profitable EAs from our backtest records and the spread is startling:
| Listing | Win rate | Profit factor | Realised risk/reward |
|---|---|---|---|
| Nautical (EUR/JPY) | 30.6% | 1.21 | ≈ 2.74 |
| Gyre (AUD/CAD) | 82.52% | 1.60 | ≈ 0.34 |
Both records made money. Their realised ratios sit roughly eight times apart, which is the clearest available demonstration that the ratio ranks nothing on its own. Nautical wins less than a third of the time and needs a big average winner to survive it; Gyre wins four times out of five and can afford an average loser bigger than its average winner. Read either number without its partner and you would reach the wrong conclusion about both.