Many traders chase accuracy — trying to win 90% of their trades. But professional traders don’t care about being right all the time. They care about how much they win when right and how little they lose when wrong. That secret lies in one formula:
Risk-Reward Ratio (RRR)This simple number can turn a losing trader into a consistently profitable one — if understood correctly.
1. What Is Risk-Reward Ratio?
It’s the ratio between potential profit and possible loss in a trade.
Example: If you risk ₹1,000 to make ₹3,000 → your RRR = 1:3
That means for every ₹1 you risk, you aim to make ₹3.
Formula: Risk-Reward Ratio = Potential Reward ÷ Possible Risk
2. Why Most Retail Traders Ignore It
Retail traders usually focus on:
Entry accuracy
Indicators
“Tips” and news
But they ignore the math. They take trades where they risk ₹5,000 to make ₹2,000 — and even with a 70% win rate, they still lose over time. Professional traders, on the other hand, can win only 40% of trades and still grow consistently because their average reward is 2–3x their risk.
3. The Power of Positive Expectancy
The key to profitability is not accuracy — it’s expectancy.
Formula:> (Win% × Average Win) – (Loss% × Average Loss)
Example: Win rate: 50%
Average win: ₹2,000
Average loss: ₹1,000
(0.5 × 2000) – (0.5 × 1000) = ₹500 per trade expected profit
Even with a 50% accuracy, you make money — because your RRR is positive. That’s why: “A 1:3 trader beats a 90% accuracy trader — every single time.”
4. How to Use Risk-Reward in Real Trades
Here’s a simple approach to implement RRR in your setup:
Step 1: Decide Your Risk per Trade
Never risk more than 1–2% of your total capital.
If your capital is ₹1,00,000, max risk per trade = ₹1,000–₹2,000.
Step 2: Set a Logical Target
Don’t aim for random profit levels.Use structure — support/resistance, order blocks, liquidity zones — to define your target.
Step 3: Check RRR Before Entering
If the setup doesn’t give at least 1:2 or 1:3, skip it. No setup is worth breaking this rule.
5. The Psychology of RRR
Most traders fail not because of bad setups — but because they don’t accept small losses. They hold losers and cut winners. A good RRR system does the opposite:
Cuts losses quickly
Lets winners run
Keeps you emotionally stable. It’s not just math — it’s mindset.
6. Institutional Traders and RRR
Institutions rarely aim for accuracy.They focus on asymmetric trades — small risk, large potential reward.
They might lose multiple times, but one large RRR win covers everything. That’s how they survive, scale, and control the game.
Final Thought: Master the Math, Master the Market
If you understand risk-reward deeply, you’ll never chase random trades again. You’ll become selective, patient, and focused — like institutions.
“Your future in trading depends not on how much you win, but how wisely you lose.”
If you want to master risk-reward, position sizing, and real institutional money management —join my ₹500 course, The 25 Lakh Lesson. It’s built from real experiences of losing ₹25 lakh and rebuilding step-by-step with professional principles.
