Measure from the planned entry
For a hypothetical long at $100 with a $96 stop and a $108 target, the planned price risk is $4 and the planned reward is $8 per unit. That is a 1:2 risk-to-reward ratio.
VCM / TRADING GUIDES
Risk-to-Reward Ratio With a Worked Example
A planned risk-to-reward ratio compares the distance to a stop with the distance to a target.
Calculate the break-even win rate
If every winner makes $8 and every loser costs $4, break-even before costs is 4 ÷ (4 + 8), about 33.3%. This describes that payout pattern and says nothing about how often the target will actually be reached.
Compare planned and realized results
Use actual fills and trading costs to calculate average wins and losses after the trade. Gaps, partial exits and execution costs can change the ratio.
Continue your research
XAU/USD Trading Hours and Session Breaks
Check your broker’s gold trading hours, daily breaks, holidays and platform timezone.
How to Calculate the XAU/USD Spread
Calculate the gap between the gold bid and ask and convert it to a cash cost for your position size.
Gold Position Size Worked Example
Work through XAU/USD position sizing using a cash risk budget, stop distance and broker contract size.
Risk and drawdown calculators
Calculate a risk budget and explore the gain required to recover from a loss.
PREPARE YOUR ENQUIRY
Make the first conversation useful.
- What entry, stop and target are you comparing?
Published by Vertex Capital Markets. General information, not personalized advice. Trading can result in substantial losses. Scope and service availability require confirmation.