Risk, updated 8 October 2026
Risk to reward ratio explained for gold
What risk to reward means on XAUUSD, how it relates to win rate, and why a high win rate alone tells you nothing.
Risk to reward (R:R) compares what a trade can lose with what it can make. Risk 100 pips to make 200 and the ratio is 1:2.
Why win rate isn’t enough
A strategy’s result depends on win rate and R:R together:
| Win rate | Average R:R | Result over 100 trades (risking $100 each) |
|---|---|---|
| 70% | 1:0.4 | 70 × $40 − 30 × $100 = −$200 |
| 50% | 1:1.5 | 50 × $150 − 50 × $100 = +$2,500 |
| 40% | 1:2 | 40 × $200 − 60 × $100 = +$2,000 |
A 70% win rate with small targets and big stops can lose money. This is the oldest trick in signal marketing: huge stops, tiny targets, an impressive win rate.
Break-even win rate
Break-even win rate = 1 ÷ (1 + R:R). At 1:1 you need over 50%; at 1:2, over 33%; at 1:3, over 25%. The risk calculator shows it for any trade.
In practice
- Check a provider’s average win and average loss in pips, not just the win rate.
- Don’t take a signal late if price has already moved toward the target: you’d be accepting a worse R:R than the signal offered.
- Partial profits change the effective R:R; see taking partial profits.