State which side is which
A risk-to-reward ratio of 1:2 can mean risking 50 for a planned gain of 100. Write the amounts alongside the ratio. Neither the target gain nor the planned loss is automatically guaranteed.
Add outcomes and costs
In a toy model, four wins of two units and six losses of one produce two units before costs. Ten costs of 0.3 turn that into minus one. An attractive ratio alone does not establish effectiveness.
Compare planned and realised values
Early exits, slippage and partial fills can change average gains and losses. Preserve the original plan alongside results. Selecting only ideal target hits misrepresents actual performance.
A farther target changes more than a ratio
Increasing the target distance improves the planned ratio numerically, but may change the chance of reaching it and the holding time. Record hit rates and costs alongside the ratio rather than treating a more distant target as an automatic improvement.
Source and reading notes
This is an independently written educational overview based on the ATFX reading linked below. Examples are illustrative, not live quotes or forecasts. It does not reproduce the original article or imply endorsement by its author.
Risk and Reward Ratio | 5 Risk management techniques · Accessed 2026-09-15