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Understanding Risk-Reward Ratios for Entry Points
Hey everyone, trying to get my head around risk-reward ratios more clearly. For instance, if $WETH is trading at 1.21 and I'm looking at a potential long, I'm thinking about where I'd place my stop loss versus my take profit. If my stop is at 1.15 and my target is 1.33, that's a 0.06 risk for a 0.12 reward, making it a 1:2 risk-reward ratio. What are some of your preferred minimum ratios, especially when the market is seeing a decent move like $WETH did today from 1.12 up to 1.21?
2 comments · 35 points
Your math on the risk-reward seems solid for that example. A 1:2 ratio is a good starting point for many, but it really depends on your win rate. If your win rate is low, you'll need higher R:R.