You can see from this example that you could still earn a $10,000 profit even if only 50% of your trades were successful.

Just keep in mind that even if you trade with a lower win % and a strong risk to reward ratio, your chances of making money are significantly higher.

BUT…

Another important point is that choosing a high reward-to-risk ratio has a cost.

The idea of having a high reward-to-risk ratio seems excellent on the surface, but consider how it might actually work in trade settings.

Consider that as a scalper, you only want to take a 3 pip risk.

You need to earn 9 pip using a return to risk ratio of 3:1. You have to pay the spread, so the odds are already against you.

You’ll need to gain 11 pips in place of the 2 pips your broker would have supplied as a spread on EUR/USD, which will force you to accept a challenging 4:1 reward to risk ratio. You would be stopped out before you could say “Uncle!” because the EUR/USD exchange rate may shift 3 pip in a matter of seconds.

To retain your preferred reward/risk ratio, you may expand your stop if you reduced the size of your trade.

The required gain would be 153 pip if you upped the number of pip you were willing to risk to 50.

You can get your reward-to-risk ratio a little bit closer to your ideal 3:1 by doing this. It’s better now, yes?

Reward-to-risk ratios are not fixed in the actual world. Depending on the time frame, trading environment, and your entry/exit locations, they must be altered.

The reward-to-risk ratio for a position trade may be as high as 10:1, whilst the ratio for a scalper may be as low as 0.7:1.