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Trading Math
What Is Risk-to-Reward Ratio
Risk-to-reward is the distance to the take profit divided by the distance to the stop loss, fixed before the trade. This paper shows you the two distances on one real plan, what each end of the ratio was worth in money on the two real days, what the ratio implies about wins and losses, and where the two prices sit on your platform's ticket.
Every planned trade has two distances. From the entry down to the stop loss — the order that closes the trade if the price falls to it — is the risk: what the trade loses if it is wrong. From the entry up to the take profit — the order that closes it if the price rises to it — is the reward: what it makes if it is right. A pip is the fourth decimal place, so on the open of 3 September 2026, with the stop at 1.15672 and the take profit at 1.16172, the two distances are 20 and 30 pips. The ratio is the second divided by the first: one to one and a half. It is fixed before the trade, on the ticket, and it says nothing about which line the price will reach.
The two ends, in money
Here are the two ends of the ratio on the two real days, ignoring the spread, at one lot where a pip is ten dollars. On 3 September the price rose through the day and reached the take profit at 15:00: the trade ended with $300. On 28 August the same plan on that day's open, 1.16530, met a day that fell; the price reached the stop at 17:00, and the trade ended with a loss of $200. Three hundred made when the target end is reached, two hundred lost when the stop end is: one and a half dollars for every dollar, which is the ratio written in money.
