The risk-reward ratio (RRR) compares the potential profit of a trade to its potential loss. It is calculated as: RRR = (Take Profit - Entry) / (Entry - Stop Loss).

A ratio of 1:2 means you stand to gain twice what you risk. Most professional traders aim for a minimum of 1:2 risk-reward on their trades, though this varies by strategy.

The break-even win rate is directly related to the RRR. With a 1:2 ratio, you only need to win 33.3% of your trades to break even. With 1:3, you need only 25%.

Higher risk-reward ratios are generally better, but they also mean your take profit is further from entry, reducing the probability of the trade reaching its target.

Combining proper position sizing with favorable risk-reward ratios is the mathematical edge that separates consistently profitable traders from the rest.