Only Take Trades With A Good Risk To Reward Ratio

What is Risk to Reward Ratio in Forex?

Risk to Reward (RR) ratio is a measure of how much your stop loss is going to be, versus how much profit you hope to make from a trade.

Every time you enter into a trade, there is a 50% chance that you are going to lose. As traders, we must accept this reality and prepare for it by ensuring we dont risk more than we intend to gain.

In simple terms, monetary value of your Take profit (TP) should always be more than that of your Stop Loss (SL). In the image, you will see the SL is worth 0.52 USD while the TP is worth 1.48 USD; meaning the reward exceeds the risk, which is good.

Risk to Reward Example

How To Estimate Risk to Reward On TradingView Charts

To calculate your RR ration on TradingView, you must click on forecasting/measurement tools, then select either “Long Position” or “Short Position”.

For this example, we have selected the Long Position since we want to buy, and we simply click on our entry point and the pink/green box appears automatically. For the colour coding, the pink shade specifies the risk area, while the green shade specifies the profit area.

The pink & green shaded areas can also be adjusted, you just need to click and drag the edges. In the image above the RR ratio is “4” meaning 1:4. This means the monetary value of the Take Profit is 4x that of the Stop Loss.