Reward-to-risk sets the bar for accuracy
A high ratio lets a mediocre win rate still make money; a poor one demands near-perfect timing. Check the ratio before every entry. Convert results to R on the R-multiple calculator.
The ratio that tells you if a trade is worth taking at all
Risk/reward is potential profit ÷ potential loss. A 3:1 trade risks $50 to make $150. At a 35% win rate with 3:1 RR you still profit: (0.35 × $150) − (0.65 × $50) = $52.50 − $32.50 = $20 per trade on average. Same 35% win rate at 1:1 loses money every trade.
The number most people quote is 2:1 as a minimum. That means your stop needs to be at most half the distance of your target. If you're targeting 6% with a 10x position, stop goes at most 3% away. If the nearest valid technical stop is 5% away, you either widen the target or skip the trade.
High RR sounds better than it is if win rate drops below a threshold. A 10:1 setup sounds incredible until your win rate is 8% because the target never gets hit. Expected value matters more than either number alone: EV = (win_rate × reward) − (loss_rate × risk).
Related: required win rate, position sizing, profit factor.