Risk-reward is the contract you sign with each positionPositionA single entry held on the broker account, with a direction, a size, and a current floating result.Click the word to learn more. The size of the potential lossLossThe realized loss on a closed position, or the sum of every losing position across a period.Click the word to learn more compared to the size of the potential gain. A 20 pipPipThe smallest standard price increment on a currency pair, usually the fourth decimal.Click the word to learn more stop lossStop LossAn exit order that closes a losing position the moment a chosen price level is hit.Click the word to learn more with a 60 pip take profitTake ProfitAn exit order that closes a winning position the moment a chosen price level is reached.Click the word to learn more 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 rateWin RateThe percentage of closed positions that ended in profit over a given period.Click the word to learn more 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.