A risk-reward ratio is a trade-planning metric designed to compare what a trade risks against what it targets — a 1:2 ratio risks one unit (the stop distance) to target two (the take-profit distance).

The ratio only means something next to a win rate: at 1:2, anything above a 33.4% win rate is profitable before costs; at 1:1, you need above 50%. In evaluations the ratio carries an extra job — it sets how many consecutive losses your daily limit can absorb. Risking 1% per trade under a 5% daily limit allows four full losses with margin to spare; risking 2% allows two. Most evaluation risk plans fail not on the ratio itself but on ignoring this interaction.