Risk-Reward Ratio
Performance
Risk-reward ratio compares the expected gain on a trade to the planned loss. A 2:1 RRR risks $1 to make $2.
Risk-reward ratio compares the potential gain of a trade to the planned loss. A 2:1 ratio risks $1 to make $2.
Some prop firms require a minimum risk-reward ratio on funded accounts (typically 1:1 or better) to discourage strategies that take many small wins and occasional large losses. The metric is also used in payout analysis as a signal of trade quality.
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