Risk management · Rookie
Reward-to-risk ratio
Also searched as: RRR, risk reward ratio
What does Reward-to-risk ratio mean?
Reward-to-risk ratio compares a trade’s planned potential gain with its planned loss. A 2:1 reward-to-risk ratio targets two units of gain for one unit at risk.
Example
A $300 target with $150 planned risk gives a 2:1 ratio.
Illustrative example; not a provider’s quoted offer.Why it matters for prop traders
A favorable target ratio does not establish how often that target will actually be reached.
Sources and further reading
The following primary sources support the terminology. Provider rules describe their own products and may change.