What's the Risk Reward Ratio Formula in Forex?
Risk to Reward Ratio = (monetary value of your stop loss / monetary value of your take profit)
So if my stop loss is worth $10 and my take profit is worth $50, that is a 1:5 risk to reward ratio meaning I am risking $1 to make $5.
You should always risk less to make more.
Risk to Reward Ration formula is simply "Risk divided by Reward"
So, if you are entering a trade how much do you want to risk? If you are setting a stop loss to risk $10 then how much do you hope to profit from the trade?
If you hope to profit $40, then you set your take profit at a price where you will gain $40 when it is triggered.
The RR Ratio is then $10/$40 = 0.25 or you can express it as a ratio 1:4
An RR Ratio of 1:4 simply means that for every $1 you risk, you hope to profit $4, which is good.
As a rule of thumb, when you calculate your Risk to Reward, the result should be below 1, just like in our example where we had $10/$40 = 0.25
If your Risk to Reward is above 1, it means for every $1 you risk, you intend to make less than a dollar in profit which is bad.
It's basically (stop loss amount divided by take profit amount). If SL is worth $10 and TP is worth $40 then ($10/$40) = 1/4 or a 1:4 RR ratio. On TradingView you can use the RR tool under measurement/forecasting tools to help you estimate RR
It's basically (stop loss amount divided by take profit amount). If SL is worth $10 and TP is worth $40 then ($10/$40) = 1/4 or a 1:4 RR ratio. On TradingView you can use the RR tool under measurement/forecasting tools to help you estimate RR
When I forst started trading, I always saw traders use this pink-green shaded box but I never know it was risk to reward ratio till a year later. Thanks for sharing, it will help beginners.