Reward-to-risk: why win rate alone means nothing
After this lesson you can calculate reward-to-risk (R) for any trade, use the breakeven formula 1 / (1 + R) to see what win rate you need, and explain why a high win rate can still lose money.
Reward-to-risk: sirf win rate kuch nahi batata
R ka matlab hai har ek unit risk par kitna reward. Risk = entry - stop, reward = target - entry, aur R = reward / risk. Rs 100 par entry, Rs 95 stop aur Rs 110 target ho to R = 2. Target chart par asli jagah honi chahiye, aam taur par agli resistance se zara pehle, na ke woh number jo sirf R ko acha dikhaye.
Breakeven win rate = 1 / (1 + R): 1R par 50%, 1.5R par 40%, 2R par 33.3%, 3R par 25%. Faisal 70% trades jeet kar bhi nuqsan mein tha, kyunke us ki jeet chhoti (0.4R) aur haar bari (1R) thi. 2R aur 40% win rate wala plan 10 trades mein +2R kamata hai. Lekin door target kam hit hote hain, is liye R aur win rate ko saath parkhein.
Quran 2:275 mein Allah ne tijarat halal aur riba haram kiya. Ulama batate hain ke ek farq risk ka hai: riba baghair risk ke tay munafa hai, jabke tijarat nuqsan ka imkaan qubool kar ke munafa kamati hai. Is liye risk ko ginna dunyadari ya dar nahi, balkay tijarat ka taqaza hai. Risk ko apne aap se chhupana ulta raasta hai.
- R = (target - entry) / (entry - stop).
- Breakeven win rate = 1 / (1 + R); 2R par 33.3% kaafi hai.
- Zyada win rate ke saath chhoti jeet aur bari haar bhi nuqsan deti hai.
Poora sabaq neeche English mein hai. Quiz English mein hai; asaan alfaaz mein.
Faisal, a sales officer in Bahawalpur, was proud of his record: 14 winning trades out of 20, a 70% win rate. Yet his account was lower than when he started. He took profits quickly, usually around Rs 2,000, because winning felt good. He let losers run, because selling felt like admitting defeat, and they averaged Rs 5,000. His 14 wins brought Rs 28,000. His 6 losses took Rs 30,000. The win rate that made him proud was hiding the problem.
What R means
R is the reward you plan for each unit of risk. Risk = entry - stop. Reward = target - entry. R = reward / risk. If you buy at Rs 100 with a stop at Rs 95 and a target at Rs 110, you risk Rs 5 to make Rs 10, so R = 2, often written 2R. Every result can be measured the same way: a full stop-out is -1R, and a win at that target is +2R.
The target should be a real place on the chart, usually just before the next resistance zone, not a number chosen to make R look good. If the nearest resistance is only 1R away, the trade does not offer 2R, whatever you write in your plan. Measuring in R also lets you compare trades of different sizes fairly.
The breakeven table
Your breakeven win rate, before fees, is 1 / (1 + R). At that win rate, the money from your wins exactly cancels the money lost on your losses, and you end flat. The bigger the reward per unit of risk, the fewer winners you need:
- R = 0.5: breakeven win rate 66.7%
- R = 1: 50%
- R = 1.5: 40%
- R = 2: 33.3%
- R = 3: 25%
The catch: R and win rate move together
This is why many experienced traders look for about 1.5R to 2R. At 2R, you can be wrong on 6 trades out of 10 and still come out ahead. But further targets are reached less often. A 5R target needs only a 16.7% win rate to break even, yet it may be hit even less often than that. R and win rate must be judged together, from your own journal, not from a promise in a video.
Expectancy joins the two: expectancy per trade = (win rate x average win in R) - (loss rate x average loss in R). A positive number means the method earns over many trades; a negative one means it loses, however often it wins. You will measure this properly in Level 9.
Worked example: Faisal versus a 2R plan
Faisal in R: take his Rs 5,000 average loss as 1R. His Rs 2,000 average win is then 0.4R. Expectancy = 0.70 x 0.4 - 0.30 x 1 = 0.28 - 0.30 = -0.02R per trade. A 70% win rate, and still negative.
A 2R plan with a 40% win rate: over 10 trades, 4 wins x 2R = +8R and 6 losses x 1R = -6R, net +2R. With 1R = Rs 5,000, that is +Rs 10,000 before fees, from a win rate below half.
Fees raise the bar. If fees and slippage cost 0.1R per trade, a 2R win really pays about 1.9R and a loss costs 1.1R, so breakeven rises from 33.3% to 1.1 / (1.9 + 1.1) = 36.7%.
Quran 2:275 states that Allah has permitted trade and forbidden riba. One difference scholars often explain between the two is risk. Riba is a return demanded without sharing in any risk; trade earns its profit by accepting the possibility of loss. So a trader who counts risk carefully is not being worldly or fearful. He is doing what trade requires: knowing what he may lose, accepting it, and seeking a fair reward for carrying it. Hiding risk from yourself, or from anyone you invest for, is the opposite spirit.
Education, not a fatwa. Where scholars differ, we say so. See what scholars say.
Chasing a high win rate by taking small profits fast and letting losses run. It feels like skill because you win often, but a few large losses erase many small wins. The damage shows up slowly, which is why people defend this habit for months before they measure it in R.
Open OGDC on the Stocks desk and go to 'Plan before you act'. Your entry is today's price. Type a stop just below the nearest support zone in the optional exit box and a target just before the next resistance zone in the optional target box, then read the reward-to-risk check. If it is below 1.5R, write down whether a better entry price would fix it or whether this trade should simply be skipped.
Plan an OGDC trade →Key takeaways
- R = (target - entry) / (entry - stop), and every result can be measured in R.
- Breakeven win rate = 1 / (1 + R): 50% at 1R, 40% at 1.5R, 33.3% at 2R.
- A high win rate with small wins and large losses still loses; win rate and R must be judged together.
Check yourself
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Barqish is an educational platform. Nothing here is financial advice or an instruction to buy or sell, and screening is not a fatwa. Spot ownership only: no leverage, no short selling. Updated 30 September 2026.