The risk-reward ratio compares how much you stand to lose against how much you aim to gain on a trade. A 1:2 ratio means risking one dollar to make two. Using it consistently lets you stay profitable overall even when many individual trades lose.
Forex Term
Risk-Reward Ratio
How much you risk compared with how much you aim to gain.
Example
Risking 20 pips to target 40 pips is a risk-reward ratio of 1:2.
Related Terms
Recommended Brokers
Pepperstone
Best for Copy Trading
Visit Pepperstone
Trading Forex and CFDs involves a significant risk of loss.
Risk
Forex and CFD trading involves significant risk of loss and is not suitable for all investors. Leverage can work against you. This content is educational and not financial advice — always do your own research.