Risk Reward Ratio
Calculate and optimize risk-reward ratios for trade setups. Use when evaluating trade quality, setting targets, or filtering low-quality setups.
Install
$ agentstack add skill-ske-labs-agent-trading-skills-risk-reward-ratio ✓ scanned · ✓ verified — works with Claude Code, Cursor, and more.
Security review
✓ PassedNo issues found. Passed automated security review. · v0.1.0 How review works →
- ✓ Prompt-injection patterns
- ✓ Secret / credential exfiltration
- ✓ Dangerous shell & filesystem operations
- ✓ Untrusted network calls
- ✓ Known-malicious package signatures
What it can access
- ✓ Network access No
- ✓ Filesystem access No
- ✓ Shell / process execution No
- ✓ Environment & secrets No
- ✓ Dynamic code execution No
From automated source analysis of v0.1.0. “Used” means the capability is present in the source — more access means more to trust, not that it’s unsafe.
About
Risk-Reward Ratio (R:R)
R:R compares potential profit to potential loss, helping filter high-quality trades.
Calculation
R:R = (Target - Entry) / (Entry - Stop)
Example: Entry $100, Stop $95, Target $115 => R:R = $15 / $5 = 3:1.
Breakeven R:R formula: (1 - Win Rate) / Win Rate
| Win Rate | Minimum R:R | Breakeven R:R | | -------- | ----------- | ------------- | | 40% | 1.5:1 | 1.5:1 | | 50% | 1:1 | 1:1 | | 60% | 0.7:1 | 0.67:1 | | 70% | 0.5:1 | 0.43:1 |
R:R Targets by Style
| Trading Style | Target R:R | | ---------------- | ------------- | | Scalping | 1:1 to 1.5:1 | | Day Trading | 1.5:1 to 2:1 | | Swing Trading | 2:1 to 3:1 | | Position Trading | 3:1+ |
Optimizing R:R
Improve Entry: Enter at better levels (OTE, pullbacks), wait for confirmation at S/R, use limit orders at key levels.
Optimize Stop: Structure-based stops (below swing low), ATR-based stops (1.5-2x ATR). Avoid arbitrary stops.
Extend Target: Use Fibonacci extensions, target next key level, allow runners with trailing stop.
Trade Filtering
| R:R | Action | | --------- | --------------------------- | | <1:1 | Skip (unless 70%+ win rate) | | 1:1 - 2:1 | Trade with caution | | 2:1 - 3:1 | Good trade | | 3:1+ | Excellent trade |
Workflow
- Identify entry from technical analysis
- Set stop loss based on structure or ATR (see stop-loss-strategies)
- Calculate R:R using the formula above
- Filter -- skip if R:R is below minimum for your win rate
- Set targets at R:R milestones (1R, 2R, 3R) for partial exits
Key Rules
- NEVER sacrifice R:R for win rate -- high R:R allows profitability even with lower win rates
- NEVER use arbitrary targets -- base them on structure, Fibonacci, or key levels
- Better entries = better R:R; be patient for optimal levels
- Always calculate R:R before entering; if the math doesn't work, skip the trade
Related Skills
- position-sizing -- R:R determines trade quality; position sizing determines trade quantity
- stop-loss-strategies -- stop placement defines the risk side of the R:R equation
Source & license
This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.
- Author: SKE-Labs
- Source: SKE-Labs/agent-trading-skills
- License: Apache-2.0
Install and usage instructions live in the source repository linked above.
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Versions
- v0.1.0 Imported from the upstream source.