# How to Find a Good Risk-Reward Ratio for Your Strategy > The right risk-reward ratio is not a universal number - it depends on your strategy's win rate and how you take profits. Here is how to find yours. **Tags:** risk-reward, strategy, analysis, trading-edge **URL:** https://traderjournal.app/money-management/how-to-find-good-risk-reward-ratio-strategy --- # How to Find a Good Risk-Reward Ratio for Your Strategy The advice to "use a minimum 1:2 R:R" is everywhere. It is not wrong, but it is incomplete. The right R:R for your strategy depends on your actual win rate and how your specific setups tend to play out. Here is how to find the right ratio using your own trading data. --- ## Why There Is No Universal Good R:R If you have a 65% win rate strategy, you can be profitable with a 1:1 R:R. Running a 1:3 might actually hurt you if it forces you to hold through retracements that cause you to get stopped out before reaching the large target. If you have a 35% win rate strategy, you need roughly a 1:2 or better to be profitable. A 1:1 R:R on a low win rate strategy is a slow drain. The math is simple. What is not simple is knowing your actual win rate before you have 100+ trades of data. This is why the default advice of "aim for at least 1:2" is a reasonable starting point - it gives a wide margin that allows profitability across a range of win rates. --- ## Step 1 - Establish Your Win Rate From Journal Data After 100+ trades with consistent entry criteria, calculate your win rate from your journal: Total winning trades / Total closed trades = Win rate Be honest about what constitutes a win. A trade that barely touched your take profit before reversing counts as a win. A trade where you moved the take profit further away and it never reached counts as whatever it actually closed at. --- ## Step 2 - Calculate Your Breakeven R:R Breakeven R:R = (1 - Win Rate) / Win Rate At 50% win rate: (0.50 / 0.50) = 1.0 - you need at least 1:1 At 45% win rate: (0.55 / 0.45) = 1.22 - you need at least 1:1.22 At 40% win rate: (0.60 / 0.40) = 1.50 - you need at least 1:1.5 Your target R:R should be above this breakeven level by enough to cover spread and commission costs. --- ## Step 3 - Analyze Your Realized R:R From Past Trades This is where your journal becomes essential. In your trade history, look at: **Average realized win (in pips or R-multiples)** **Average realized loss (in pips or R-multiples)** Your realized R:R = average win / average loss Compare this to your planned R:R. If you consistently plan 1:3 but your realized R:R is 1:1.4, your exit management is significantly underperforming your planning. The realized R:R from your historical data, combined with your actual win rate, tells you your true current profitability profile. --- ## Step 4 - Test Changes Systematically If you decide to change your R:R (by moving targets or stops), test the change in your journal over the next 50-100 trades. Do not retroactively apply the new R:R to your existing history. Changes to evaluate: **Extending take profit:** Does a 1:3 target rather than 1:2 improve or hurt results? If the larger target gets hit 60% as often as the smaller one (losing 40% of wins), net expectancy might decrease even though the per-win payout increases. **Partial profit-taking:** Taking 50% off at 1:1 and letting the rest run to 1:3. Does the partial exit improve psychological comfort without significantly hurting expectancy? **Trailing stops:** Using a trailing stop instead of a fixed target. What realized R:R does this produce in your specific strategy? --- ## What a Journal Reveals About Your R:R Without a journal, these questions are impossible to answer accurately. With a journal, they become data problems with numeric answers. Your by-setup tag analysis in Trader Journal's reports shows you the average win and average loss per setup type. This directly gives you your realized R:R per setup category. Download at android.traderjournal.app or ios.traderjournal.app.