OPENRANGE / RISK/REWARD RATIO EXPLAINED

A bigger target.
Not a bigger guarantee.

A risk/reward ratio compares amounts. It does not tell you how often the target will be reached. Learn the difference before a neat-looking number becomes your whole plan.

Explore risk and expectancy lessons →See the practical example ↓

Public lesson preview · Private member curriculum · Education, not trade signals

What does a 1:2 risk/reward ratio mean?

Here, risk comes first. A constructed exercise with a $10 gross planned loss and $20 gross planned gain has risk:reward of 1:2. These are teaching amounts, not an instruction to enter a market.

Add a hypothetical $2 total cost to either outcome. The loss becomes $12 and the gain becomes $18. Net risk:reward is 12:18, or 1:1.5. Costs made the potential gain smaller and the potential loss larger.

Did the $20 gross target become a $20 net profit?

No. Under the stated cost assumption, it becomes $18 net. And a target is still planned: a fill and completed outcome are needed to record an actual result.

Slippage and different exit decisions can change these amounts further. Keep execution assumptions visible rather than assuming the drawn target always fills.

The missing half: how often each outcome occurs.

Planned ratio

Compares supplied loss and gain amounts. It does not supply the probability of either outcome.

Observed outcomes

Actual wins, losses and costs show what happened in a sample. Do not substitute the chart target for the average realized win.

Expected value model

Weights possible outcomes by assumed probabilities. Its answer depends on those inputs and does not promise the next result.

Try ten fictional outcomes.

Using the simplified net amounts above, four wins of $18 total $72. Six losses of $12 total $72. The example ends at zero net: $72 minus $72. Its 40% win rate breaks even only under these exact two-outcome assumptions.

Does a planned 1:2 gross ratio guarantee that result?

No. The example also assumed four wins, six losses and identical costs and outcomes. A ratio alone does not tell you those frequencies; real exits can vary.

Change it to three wins and seven losses: $54 minus $84 is a $30 net loss. The headline target ratio stayed the same; the result changed.

OPENRANGE teaches calculations alongside recorded decisions. Practice the relationship with changed numbers rather than hunting for one universally winning ratio.

Record actual outcomes in a practice journal →

Further reading: CME: risk management and a trade plan. Checked September 26, 2026.

TAKE THIS INTO THE ACADEMY

Go beyond a ratio on a screenshot.

The academy connects planned loss, costs and observed outcomes. Learn to compare examples and explain what a calculation does—and does not—establish.

  • Label gross versus after-cost amounts.
  • Separate a planned target from an actual average win.
  • Consider win rate and outcome size together.

Clear questions. Useful answers.

What is the best ratio?

No universal number is established here. Costs, actual outcome sizes and their frequencies matter. Moving a drawn target farther away does not create an edge.

Is risk/reward the same as expectancy?

No. A ratio compares amounts. An expectancy model weights outcomes by assumed probabilities; an observed average summarizes a sample. Neither makes an individual trade certain.

FROM ONE ANSWER TO A CONNECTED EDUCATION

Keep the question.
Build the understanding.

See how this topic fits into foundations, guided practice and deeper study. Start with the part you can explain—not the one with the loudest promise.

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Course completion does not guarantee profits, evaluation success or readiness to trade real money.

FIND YOUR STARTING POINT

Big ambition.
A clear first step.

Explore the foundations, map out two weeks of study, or see how futures, risk and strategy connect.

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