Risk-Reward Ratio: Why 1:2 Isn't Always the Answer

Every trading course tells you to aim for a 1:2 risk-reward ratio. But this oversimplified advice can actually hurt your trading. The Conventional Wisdom "Only take trades where your potential reward is at least twice your risk." This sounds logical: win 50% of the time at 1:2 RR and you're profitable. But reality is more nuanced. The Problem with Fixed RR Targets 1. Market Structure Doesn't Care About Your Targets Setting an arbitrary 1:2 target means your take-profit might land in the middle of nowhere — no support, no resistance, no logical exit point. The market frequently reverses at structural levels, not at your desired profit multiple. 2. Win Rate and RR Are Inversely Correlated Higher RR targets = lower win rate. The math: RR Ratio Required Win Rate to Break Even 1:1 50% 1:2 33.3% 1:3 25% 1:5 16.7% A 1:3 target sounds great, but if your win rate drops from 55% to 30%, you're worse off. 3. Expectancy Is What Matters Expectancy = (Win Rate × Avg Win) - (Loss Rate × Avg Loss) A s