1:1, 1:2 and 1:3 Risk-to-Reward Examples

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 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 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.