It's the distance(pips value) from stop loss to entry point compared to distance(pips value) from entry point to potential profit.
Ignored
Or, said another way, "Whats the worst that can happen in this trade, what's the best and how do they relate to each other?". A 50-pip SL with a 100-pip TP is a 2:1 ratio. It's important to understand it because it will give your "win rate". You have to "win" a lot fewer 10:1 trades and you have to win a TON if you want to use something crazy like 1:2
Or, said another way, "Whats the worst that can happen in this trade, what's the best and how do they relate to each other?". A 50-pip SL with a 100-pip TP is a 2:1 ratio. It's important to understand it because it will give your "win rate". You have to "win" a lot fewer 10:1 trades and you have to win a TON if you want to use something crazy like 1:2
Ignored
Sorry I understand that - but how do you determine that this trade will produce a rr of 2:1 or 3:1 - in the end it could stop at 1:1 and then reverse
