R in Trading: The Ultimate Guide to Risk:Reward (With Zero BS)

Let me paint you a quick picture...

Two traders start with $10,000:

A) Trader Bob: Wins 80% of his trades
B) Trader Sally: Wins only 40% of her trades

After a year, Bob's blown up his account. Sally's up 312%.

How the hell does that work?

One word. Well, not even a word: R

And today I'm gonna break down everything about R, or risk:reward ratios, in a way that actually makes sense...

WTF is "R" Anyway?

Look, forget the textbook definition for a second.

Think of R like this: It's your Risk Unit.

If you're willing to risk $100 on a trade, that's your 1R. Everything else gets measured against that.

So if you:

Risk 100 (1R)...
To make 100 (1R)...
That's a 1:1 risk:reward ratio

If you:

Risk 100 (1R)...
To make 300 (3R)...
That's a 1:3 risk:reward ratio

Simple right?

The Math That Actually Matters

Here's where it gets interesting...

A lot of trading "gurus" will tell you:
"Always shoot for 1:3 risk:reward!"
"Never take less than 1:2!"

But they're missing something crucial...

The higher your reward target... The less likely you are to hit it.

Check this out:

• 1:1 Risk:Reward
  • Win rate needed to break even: 50% - Realistic? Very
• 1:2 Risk:Reward
  • Win rate needed to break even: 34% - Realistic? Yes
• 1:3 Risk:Reward
  • Win rate needed to break even: 25% - Realistic? Getting harder
• 1:5 Risk:Reward
  • Win rate needed to break even: 17% - Realistic? Now we're dreaming

"But wait!"...I can hear you thinking right now. "Those are lower win rates, that should be easier."

And sure, it would be, if it was just as easy to hit those bigger and bigger targets. But, it's the opposite.

• It's a lot harder.
• Those big moves happen less often.
• And if you miss them, your numbers go to shit, real quick. Like if:
  • You took a day off, and the "good one" hit while you were out.
  • You nailed the entry on the big one but got stopped out, just barely, before it went where you wanted.
  • You went to the toilet, and missed your entry..

And regardless of the reason...Your odds, too, are now in the toilet.

(By the way, this is exactly why having a proper trading journal is crucial - more on that here). Only then can you understand how this affects your trading.

The Sweet Spot Nobody Talks About

Here's what 22 years of trading has shown me:

The most profitable traders usually live in the 1:1.5 to 1:2 range.

Why?

Because it's the perfect balance of:

• Achievable win rates
• Meaningful profits
• Psychological sustainability

Think about it...

With 1:1.5 risk:reward:

• You only need to win 40% to be profitable
• Your losses are manageable
• You're not constantly getting stopped out trying to reach unrealistic targets
• Your opportunities come more frequently.

The Psychology Nobody Mentions

Here's the real reason most traders fail with "high R trades"...

They can't handle the losses.

Let's say you're shooting for 1:5 R:R...

You might need to lose 6-7 trades in a row before hitting that one big winner. And then, you still need one of the next 3 to be a winner, just to break even. 

Very few have the mental fortitude to handle that. Most traders:

• Get shook out early
• Start doubting their strategy
• Take revenge trades
• Blow up their account

The only way to know if YOU can handle higher R trades?

Track them. Test them. Review them.
(Here's how top traders do exactly that)

How to Actually Use R in Your Trading

Here's my framework:

1. Define Your R

• Start with 1% of your account
• Example: 10,000 account = 100 risk per trade

2. Set Clear Exits

• Stop loss = -1R
• Profit target = 1.5R to 2R
• No wishful thinking

3. Track Everything (Using The Right Tools)

• R gained/lost per trade
• Total R per week/month
• Win rate at different R:R ratios

By the way... trying to track all this in Excel is like performing surgery with a butter knife.

That's why I spent 30+ days testing every major trading journal out there.
(More on that in a second...)

4. Adjust Based on Data

• Find YOUR sweet spot
• Ignore what "gurus" say about minimum R:R
• Let results guide you

Now, you could stop right here, and start tracking your R using a trading journal.

But if you wanna dive deeper (now, or later, read on).

The R Nobody Tells You About

Alright, let's get into the juicy stuff nobody talks about...

Because there's actually three types of R:
• Theoretical R (what you PLAN)
• Actual R (what you GET)
• Fractional R (when you switch it up)

Let me break this down...

Theoretical R: Your Trade Plan

This is what you think will happen.

Like when you say:
"I'm gonna risk $100 to make $300!"
That's a theoretical 1:3 R:R trade.

Cool story bro...
But that's just your intention.

Actual R: Reality Hits Different

This is what actually happens.

Maybe you:

• Get spooked and take profit early
• Let that loss run a bit too long
• Get some nasty slippage

So that "perfect" 3R trade?
Might end up being 1.2R or 1.8R...

And those small differences?
They add up fast.

Fractional R: Getting Flexible

Sometimes you might not want to risk your full R.

Maybe:

• Market conditions are sketchy
• Your confidence is lower (been trading poorly?)
• You need to conserve capital.
• You're foggy headed or more emotional (slept like shite, had a fight with your girl, whatever)
• You're testing something new

So instead of risking your normal amount...
You might only risk 0.5R

That means:

• Normal risk = $100 (1R)
• This trade risk = $50 (New R)
• Target still = 2R (but now that's $100 instead of $200)

Why These Actually Matter

Here's where it gets real...

Most traders think they're trading 1:3 R:R...so 3R...

But when you look at their actual results:

• Losses average -1.3R (slippage/holding too long)
• Wins average 1.8R (taking profit too early)

So their real reward:risk?
1.8R ÷ 1.3R = 1.38

That's less than half what they thought!

And this is why most traders:

• Can't figure out why they're not profitable
• Get confused when their results don't match their plan
• Give up thinking their strategy doesn't work

How to Track This Properly

Look, you need to be aware of three numbers for every trade (but don't get your boxers in a twist, trading journals do the hard work for you):

1. Use Dollar Amounts: Trust me, it keeps things more simple over time
2. Theoretical R: What you planned
3. Actual R: What you got
4. Fractional: If you changed it up, gotta tell your journal. 

Theoretical R: You set this up when you configure your trade journal. You tell the computer what your stop/target is on (I use dollar amounts). Some journals let you set this per account.

Actual R: When you import trades, the journal calculates this automatically. Stick to your plan, to be less embarrassed when this happens.

Fractional: If on a given trade, or given day, you changed your R - update it manually. How to do that varies by journal, but it's not hard.

Analysis: How different is your actual R from your theoretical R, and why?

If you notice big differences?
That's showing you where your execution needs work.

And the only way to spot these patterns...
Is with proper tracking.

The Bottom Line

Look, R isn't complicated. It's just a way to:

• Standardize your risk
• Compare trades fairly
• Track real progress

But here's what matters:

The best R:R ratio is the one YOU can execute consistently.

Don't let anyone tell you different.

Because a mediocre strategy you can actually follow... Beats a "perfect" strategy you can't execute.

The key? Actually tracking your R properly.

After testing dozens of trading journals, I've found several great journals that track R. Most of them let you analyze the crap out of R, too. That way you can plug some leaks in your game, too.

P.S. Found this helpful? Share it with a trader who needs it. We all start somewhere.