How it works
Risk is the distance from entry to stop. Reward is the distance from entry to target. Dividing one by the other gives the R multiple: a 3R target pays three times what the stop costs.
When you scale out, each take profit carries part of the position. The blended R:R weights every target by the share closed there. The break-even win rate tells you how often the trade must work just to not lose money over time.
Formulas
- Risk = |Entry − Stop|; Reward = |Target − Entry|
- R multiple = Reward ÷ Risk
- Blended R = Σ (share closed at TPn × R of TPn)
- Break-even win rate = 1 ÷ (1 + Blended R)
- TP price from target R (long) = Entry + R × Risk; short = Entry − R × Risk
Questions traders ask
What risk reward ratio is good?
There is no universal number. A 1:1 setup is fine if it wins 60% of the time; a 1:3 setup only needs to win a little over 25%. Compare the ratio with your real win rate.
Should fees be included?
For tight stops on lower timeframes, yes. Fees can turn a 2R target into 1.7R. Use the PnL calculator to see the net numbers.