What is Risk-to-Reward (R:R)?

The ratio between your stop distance and target distance — the math that decides if a trade is worth taking.

The DefinitionRisk-to-Reward (R:R), defined

Risk-to-Reward (R:R) is the ratio of potential loss to potential gain on a trade, measured in 'R' multiples where 1R equals your risk. A trade risking 4 points to make 12 points is a 3R setup. R:R is the foundation of trading math: at 2R, you only need a 34% win rate to break even. At 3R, 26%. The LA Traders rule: if the Run target doesn't offer at least 2R from your Retrace entry, the setup isn't A+ — regardless of how good the Reveal looks.

Why It MattersWhy Risk-to-Reward (R:R) matters

You don't need to be right often. You need to be paid when you're right and charged little when you're wrong. R:R is that math.

In PracticeRisk-to-Reward (R:R) — a real example