Risk-Reward Ratio

The ratio of a position's potential loss to its potential gain, set by the stop loss and take profit.

Risk-reward is the contract you sign with each position. The size of the potential loss compared to the size of the potential gain. A 20 pip stop loss with a 60 pip take profit is 1 to 3: one unit of risk on the table, three units targeted.

This number quietly decides how often you need to win. A 1 to 3 strategy can lose more often than it wins and still grow, because the winners are big enough to cover several losers. A 3 to 1 strategy has to win most of its positions or the math falls apart. Neither shape is automatically better than the other. They are two different paths up the same mountain.

What matters is that the risk-reward and the win rate match each other. A 3 to 1 strategy with a 40 percent win rate is broken. A 1 to 4 strategy with a 60 percent win rate is exceptional. The combination is the thing.

Algorithmic strategies are explicit about this from the moment the order opens. Every position ships with a stop and a target attached. The risk-reward is known before the position has any history. Javlot publishes the realized risk-reward of each strategy alongside the win rate, because reading one without the other does not tell you anything.

Glossary entries are educational. They describe how a term is commonly used in automated forex investing, including on the Javlot platform. They are not a personalized recommendation and not a forecast. Past performance does not guarantee future results.