The first number is what you risk, the second is what you target. Also called: R:R, R/R, return/risk. Finviro's term: “R:R”.
What this ratio is
Risk/Reward Ratio (R:R · Risk:Reward) weighs a trade before you enter it: the distance from entry to target divided by the distance to the stop. A ratio of 1:3 means you risk one dollar to seek three. It puts the trade's design in one number you know before the first cent is paid.
Its fixed partnership with the win rate
On its own it means nothing: 1:3 is excellent if you are right 40% of the time and a loser if you are right 20%. The deciding formula: required break-even rate = 1 ÷ (1 + R:R). So a 1:3 trade breaks even at only a 25% hit rate, and every point above it is net profit. The two numbers are the two pans of one scale.
The condition for honesty
An honest ratio is built from real levels: a stop behind a structural level that truly invalidates the idea, and a target at a level that can be reached within the trade's time frame. Not a stop squeezed in to flatter the ratio (it gets hit by noise), and not a fantasy target placed to complete the shape.
Hypothetical example
Entry at $102, stop behind a structural low at $99, target at measured resistance at $111: risk of $3 for a reward of $9. A ratio of 1:3 breaks even at a 25% hit rate. A method that hits 45% with this geometry compounds steadily, even while losing more than half the time.
Common mistake
Flatter the ratio by moving the stop, not by choosing the trade: tightening the stop to the middle of the noise creates a paper 1:5 that is hit before the idea has time to work. A good ratio is picked from the market (an entry close to the invalidation level), not fabricated in the calculator.
Where to see it on the platform
The signal model calculates it automatically from each idea's levels, and the trading journal compares the planned ratio with the one actually achieved.
