Risk / reward ratio

The reward-to-risk ratio compares the distance from entry to target with the distance from entry to stop. A 2:1 trade aims to make twice what it risks, and implies a break-even win rate of roughly 33%.

A higher ratio buys tolerance for being wrong, which removes the pressure to predict accurately. It must be assessed honestly, though: a target placed beyond a major level to flatter the ratio is not a plan, it is arithmetic wishful thinking.