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Forex Guide · Risk & Costs

Risk:reward ratio explained, with the break-even win rate

Risk:reward (RR) compares what you can lose with what you can win on a trade. Together with your win rate, it decides whether a strategy makes money.

Qazi Forex Tips
By the Qazi Forex Tips team, led by Dr. Qazi Abdul Basit, Ph.D
Updated 23 October 2026
Dr. Qazi Abdul Basit
Dr. Qazi's takeIn his own words, from his lectures and teaching

A written plan you follow, and the patience to skip a trade when the setup is not there.

How Dr. Qazi teaches

How to calculate it

Divide the distance to the take profit by the distance to the stop loss. Stop loss 20 pips, take profit 40 pips: RR = 1:2. In R-multiples, a full win is +2R and a full loss is −1R.

The break-even win rate

Break-even win rate = 1 ÷ (1 + reward) for a 1:reward trade:

  • 1:1 → 50%
  • 1:1.5 → 40%
  • 1:2 → 33.3%
  • 1:3 → 25%

Above that win rate the strategy makes money before costs; below it, it loses.

A 1:2 trade and the win rate needed to break even at different risk:reward ratios.
A 1:2 trade and the win rate needed to break even at different risk:reward ratios.

Expectancy

Expectancy per trade = win rate × average win − loss rate × average loss. With 40% winners at 1:2: 0.4 × 2R − 0.6 × 1R = +0.2R per trade. Over 100 trades risking 1% each, that is about +20% before costs.

A big RR is not automatically better

A 1:5 target that sits beyond a strong level is rarely reached, so the win rate drops. Put the target just before the next real support or resistance and accept the RR the chart gives; skip the trade if it is too small.

Khulasa (Roman Urdu / Hindi)

  • RR = TP ka faasla ÷ SL ka faasla.
  • Break-even win rate: 1:1 = 50%, 1:2 = 33.3%, 1:3 = 25%.
  • Expectancy: win% × avg win − loss% × avg loss.
  • Target asal level par rakhein, sirf bara RR na dekhein.

Questions

What is a good risk reward ratio?

Many traders look for at least 1:1.5 or 1:2, provided the target sits at a realistic level.

What win rate do I need at 1:2?

About 33.3% to break even before costs; above that the strategy is profitable.

Is 1:1 risk reward bad?

Not necessarily; it needs a win rate above 50% after costs. Many scalping methods work near 1:1.

What is an R-multiple?

A result measured in units of the risk: a win of twice the risk is +2R, a full loss is −1R.

How do I calculate risk reward in MT5?

Measure the pips from entry to SL and from entry to TP and divide; a trade panel such as QFT Trade Assistant shows it live.

Should I move my take profit further during the trade?

Only by a rule you set in advance; moving targets on emotion usually lowers results.

Watch the video lessons

Video lesson · 18:38Where to set stop loss and take profit, and when to close halfVideo lesson · 33:42Money management plan: grow a small account step by stepVideo lesson · 24:00How to backtest a trading strategy like a pro

Education only, not financial advice. Trading forex, Gold and CFDs carries a high risk of loss. Contract sizes, spreads and leverage differ by broker; check your own broker's specifications.