Take-Profit and Risk/Reward: Why 1:1 Does Not Work
How to choose a target, what an R multiple is, and the win rate each risk/reward ratio demands — with a break-even table.
A take-profit closes a winning position automatically. Its purpose is not to squeeze the maximum out of a move but to fix the risk-to-reward ratio in advance.
Count in R
R is your risk on a single trade. With a 40-pip stop and $20 at risk, 1R = $20 = 40 pips. An 80-pip target is 2R.
This unit is useful because it is account-independent. A strategy producing +12R a month behaves the same on $1,000 and on $100,000.
How often you need to win
| Risk/reward | Break-even win rate |
|---|---|
| 1:1 | 50% |
| 1:1.5 | 40% |
| 1:2 | 33% |
| 1:3 | 25% |
That is before costs. Add spread and commission and every row shifts up by three to five percentage points.
Which explains why "1:1 at a 60% win rate" looks fine on paper and loses on a live account: 60% rarely survives a long sample, and costs eat the cushion.
Where to put the target
At structure: the nearest opposing level, the edge of the range, the previous day's high or low. If the nearest sensible target is under 1.5R away, skip the trade — not because it will lose, but because the maths is against you.
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Frequently asked questions
What risk/reward ratio is acceptable?
1:1.5 and above. At 1:2 you break even on a 34% win rate; at 1:1 you need over 50%, and once spread and commission are counted, closer to 55%.
Should I use a take-profit or close manually?
Use the take-profit if the strategy has been tested. Manual closing almost always skews the statistics the wrong way — winners cut early, losers held long.
What is R?
R is the size of your risk on one trade. A 2R profit is twice what you risked, whatever the account size.
- Min. deposit
- $100
- Spread
- from 1.2 pips
- Commission
- $3.5 per lot per side
72% of retail investor accounts lose money when trading CFDs
- Min. deposit
- $50
- Spread
- from 1.0 pip (Standard STP)
- Commission
- $3 per lot per side (Raw ECN)
CFDs are complex instruments with a high risk of losing money