Risk Reward Ratio and Win Rate: Break Even Table
Why a 70% win rate can still lose money: the break even win rate for every risk reward ratio, expectancy in R with worked examples and how fees change the math.
Win rate on its own tells you almost nothing. A trader who wins 70% of the time can lose money, and a trader who wins 35% of the time can make it. What decides it is the win rate together with the size of the average win compared to the average loss.
Measure trades in R
R is the amount you risk on a trade, the distance from entry to stop in dollars. A trade that loses its full stop is -1R. A trade that makes twice the risk is +2R. Measuring in R lets you compare trades of different sizes and markets on one scale.
The break even table
Break even win rate = risk ÷ (risk + reward).
| Risk : reward | Break even win rate |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50% |
| 1 : 1.5 | 40% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
| 1 : 4 | 20% |
Above the break even win rate you make money on average, below it you lose, before fees.
Expectancy: the number that matters
Expectancy = win rate × average win − loss rate × average loss (all in R)
A 40% win rate with 2R winners: 0.40 × 2 − 0.60 × 1 = +0.2R per trade. Over 20 trades that is about +4R.
How a 70% win rate loses money
Twenty trades, 14 winners and 6 losers, a 70% win rate. But the winners were taken early at +0.5R on average, and the losers ran past the planned stop to -1.5R on average:
| Trades | Average | Total | |
|---|---|---|---|
| Winners | 14 | +0.5R | +7R |
| Losers | 6 | -1.5R | -9R |
| Net | 20 | -2R |
This is one of the most common patterns in trading journals: grabbing small wins because they feel good, and giving losers room because taking the loss feels bad. The win rate looks great, the account goes down.
Fees and slippage count too
Fees are a fixed cost per trade, so in R they hurt tight stops the most. With a 10 point stop on MNQ, 1R is $20 per contract; a $0.74 round turn fee is almost 0.04R on every trade, win or lose. Over hundreds of trades, that can turn a small positive expectancy negative.
What to do with this
- Record every trade in R: planned risk, result, and whether you followed the plan.
- After 50 to 100 trades, compute win rate, average win and average loss.
- Check the win rate against the break even table for your average win.
- If your expectancy is negative, look first at exits: early profit taking and moved stops usually do more damage than entries.
Related: moving your stop to breakeven changes both your win rate and your average win.
Get the numbers from practice
ChartTrainer's journal records every trade with its result and R, and Progress shows win rate, average win and loss and results in R as you practice on replayed sessions. You can also run a strategy through the backtester for the same numbers over hundreds of trades. Try the futures simulator.
Videos
Questions
- What is a good risk reward ratio?
- There is no single good ratio. A ratio only means something together with your win rate. 1:2 needs to win more than 33.3% of trades to make money, 1:1 needs more than 50%.
- How do I calculate the break even win rate?
- Break even win rate = risk ÷ (risk + reward). For a 1:2 trade that is 1 ÷ 3 = 33.3%. For 1:1 it is 50%.
- What is expectancy in trading?
- The average result per trade in R: win rate × average win in R minus loss rate × average loss in R. Positive expectancy means the trades make money on average over many trades.
- Can you be profitable with a 30% win rate?
- Yes, if your winners are big enough. At a 30% win rate you need an average win of more than 2.33R for each 1R loss to come out ahead, before fees.