R:R (Reward-to-Risk ratio)
Volume Profile Analysis glossary · Trading Strategies & Execution
Definition
The ratio of a trade's profit target distance to its stop distance. A 3R target with 1R stop produces 3:1 R:R.
R:R (Reward-to-Risk ratio) in plain English
Reward-to-risk asks a simple question before you ever click buy: "How much am I trying to make versus how much I could lose?" If your exit-for-profit is $30 away and your bail-out point is $10 away, that's a 3:1 ratio — you're chasing three dollars for every one you're risking. Traders love a high ratio because it means you can be wrong more often than right and still come out ahead over many trades. It's like a bet where winning pays you $3 but losing only costs you $1 — you don't need to win most bets to end up richer.
Also called: Reward-to-Risk ratio
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