Calculate risk-to-reward ratio and required win rate
The risk/reward ratio compares potential profit to potential loss on a trade. A ratio of 1:2 means you stand to make twice what you risk.
The required win rate tells you how often you need to win to break even. With a 1:2 ratio, you only need to win 33.3% of the time. With 1:1, you need 50%.
Most professional traders aim for at least 1:2 risk/reward. Higher ratios allow lower win rates while remaining profitable.
