Is a 1:2 risk to reward ratio enough to be profitable?
I plan every trade for 1:2 but I am still not profitable. Is the ratio enough on its own?
For education only. This is not financial advice. Trading carries a high risk of loss.
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1 Answer
Best answer
It depends on your win rate. The break-even win rate is 1 / (1 + R), where R is your reward to risk ratio. With 1:2 (R = 2) you break even at about 33% wins. With 1:1 you need 50%. With 1:3 you need only 25%.
But this ignores costs. Spreads, commission and slippage move the break-even point up, especially on small targets.
Also, the ratio you plan is not always the ratio you get, because trades are often closed early. Track your real average win and average loss in your journal.
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