Guide · Risk Management
What Is a Risk-Reward Ratio and Why Every Trade Has One
Two trades can have the exact same odds of winning and still be completely different bets, once you factor in how much each one risks against how much it pays.
A risk-reward ratio compares how much you stand to lose on a trade if it goes wrong against how much you stand to gain if it goes right. A trade risking $100 to potentially make $300 has a 1:3 risk-reward ratio — for every dollar risked, three are on offer if the trade works out.
This number matters independently of win rate, which is the part beginners most often skip. A strategy that wins only 40% of the time can still be profitable overall if its average winning trade is large enough relative to its average losing trade — and a strategy that wins 70% of the time can still lose money if its losses, when they happen, are disproportionately large.
That's why experienced traders tend to think about risk-reward before entering a position, not after: setting a stop-loss and a target in advance defines the ratio up front, rather than leaving it to be decided emotionally in the middle of a trade that's already moving.
Trade2Spike's three modes each define this ratio differently by design: Fast Binary fixes it exactly (a defined stake against a fixed +85% payout or a total loss), while Long Term's 8% stop-loss sets the downside side of the ratio in advance, leaving the upside open to how far the 48-hour move actually runs.