1:1, 1:2 and 1:3 Risk-to-Reward Examples
Worked examples of 1:1, 1:2 and 1:3 risk-to-reward ratios, including the win rate required to break even for each.
- 7 min read
- For beginners
- Educational
- Pelajaran 2 daripada 5
This lesson walks through worked examples of three commonly discussed risk-to-reward ratios: 1:1, 1:2 and 1:3. Each example uses hypothetical, illustrative figures.
These are hypothetical, illustrative examples only, not a recommendation for any specific ratio or trade.
A 1:1 Ratio Example
A 1:1 ratio means the potential reward equals the potential risk. For example, if a trader risks a hypothetical $100 (stop-loss distance) to potentially gain $100 (take profit distance), this is a 1:1 ratio.
With a 1:1 ratio, the mathematical breakeven win rate — the win rate needed just to cover losses with wins, before any additional profit — is 50%. This means more than half of trades would need to be winners just to avoid an overall loss, before accounting for trading costs like spread and commission (covered in the Trading Essentials module).
A 1:2 Ratio Example
A 1:2 ratio means the potential reward is twice the potential risk. For example, risking a hypothetical $100 to potentially gain $200.
With a 1:2 ratio, the mathematical breakeven win rate is approximately 33.3% — meaning a trader could theoretically be wrong roughly two-thirds of the time and still break even, before costs, since each win is worth twice as much as each loss.
A 1:3 Ratio Example
A 1:3 ratio means the potential reward is three times the potential risk. For example, risking a hypothetical $100 to potentially gain $300.
With a 1:3 ratio, the mathematical breakeven win rate is 25% — meaning a trader could theoretically win only one in four trades and still break even, before costs, since each win covers three losses' worth of risk.
Why These Breakeven Figures Matter
These breakeven win rates illustrate the mathematical relationship between ratio and required accuracy — a wider ratio requires a lower win rate just to break even. However, as covered in the following lessons, achieving a specific ratio doesn't automatically mean a trader's actual win rate will be anywhere close to, above, or below this breakeven figure — that depends entirely on the trading approach itself.
Summary
A 1:1 ratio requires an approximate 50% win rate to break even, a 1:2 ratio requires approximately 33.3%, and a 1:3 ratio requires 25% — all before trading costs. These breakeven figures illustrate the mathematical relationship between ratio and required accuracy, though a trader's actual win rate depends entirely on their specific approach, not on the ratio itself.
Frequently Asked Questions
Approximately 50%, before accounting for trading costs like spread and commission.
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