📊 How to Build a Risk-Reward Strategy That Works

🎯 1. Understand the Risk-Reward Ratio (RRR)

Definition:
The risk-reward ratio measures how much potential profit you seek relative to how much you’re willing to risk.

Formula: RRR=Potential RewardPotential Risk\text{RRR} = \frac{\text{Potential Reward}}{\text{Potential Risk}}

Example:

• Risking 50 pips to make 150 pips → RRR = 3:1

🔑 Key takeaway: You don’t have to win most trades. With a good RRR, even a 40% win rate can be profitable.

🧮 2. Choose Your Ideal RRR

• Beginner recommendation: Start with 2:1 or 3:1 RRR.
• Scalpers may use lower ratios like 1.5:1.
• Swing traders often aim for 2:1 to 4:1.

📌 Avoid chasing huge RRRs (e.g., 10:1) without a solid edge—it leads to low win rates and frustration.

📐 3. Define Entry, Stop Loss, and Take Profit

• Entry: Use technical setups (e.g., support/resistance, breakouts).
• Stop Loss: Place logically—below/above structure, not arbitrarily.
• Take Profit: Set it based on the RRR you’ve chosen and price action zones.

🛑 Never place TP and SL randomly just to match a ratio—price structure must justify them.

📊 4. Use Risk Percentage Per Trade

• Risk no more than 1–2% of your account per trade.
• Calculate your lot size based on: \text{Risk $} = \text{Account size} \times \text{Risk %}

Example:

• Account: $5,000
• Risk: 1% → $50
• Stop loss: 50 pips → Lot size = 0.1

📉 5. Track Your Trades & Optimize

• Log your RRR for every trade.
• Measure your average RRR and win rate over time.
• Use the Expectancy Formula:

Expectancy=(W×R)−(L×1)\text{Expectancy} = (W \times R) – (L \times 1)

Where:

• W = win rate
• R = average reward-to-risk
• L = loss rate (100% – W)

Example:
Win rate = 45%, RRR = 2:1 → (0.45×2)−(0.55×1)=0.35→Profitable(0.45 \times 2) – (0.55 \times 1) = 0.35 → Profitable

🧠 6. Stick to the Strategy with Discipline

• Trust your RRR plan even when tempted to exit early.
• Avoid emotional decision-making (e.g., moving stop losses).
• Consistency is the key to letting the math work over time.

✅ Final Tips:

• Use alerts or automation to stick to your levels.
• Adjust your RRR only after analyzing past trades—not mid-trade.
• Backtest your setup with historical data.

🔁 Summary (for quick formats like reels or slides)

• 📐 Pick a logical RRR (e.g., 2:1)
• 🔒 Set stop loss at market structure, not randomly
• 🎯 Choose TP that fits both your ratio and price action
• 💰 Risk 1–2% per trade
• 📊 Track win rate & adjust