The 1:3 risk reward trading strategy is one of the most powerful and widely recommended approaches in trading, especially for beginners who want to become profitable without winning every trade. This strategy focuses on risking 1 unit to gain 3 units, which means even with a lower win rate, traders can still grow their accounts consistently.
In this in-depth guide, you will learn:
What a 1:3 risk reward ratio is
Why professional traders prefer it
How to apply it step by step
Real trading examples (forex focused)
A comparison table to understand risk vs reward
FAQs (schema friendly)
What Is a Risk Reward Ratio?
The risk reward ratio (RRR) compares how much you are willing to risk on a trade versus how much you expect to gain.
For example:
Risk: $10
Reward: $30
This is called a 1:3 risk reward ratio.
Instead of focusing on how many trades you win, this strategy focuses on how much you make when you win compared to how much you lose when you lose.
What Does 1:3 Risk Reward Mean in Trading?
A 1:3 risk reward strategy means:
If your stop loss is 20 pips
Your take profit will be 60 pips
This approach allows traders to be profitable even if they lose more trades than they win.
Why 1:3 Risk Reward Strategy Is So Powerful
Most beginner traders fail because:
They risk too much
They take small profits
They let losses run
The 1:3 strategy solves these problems.
Key Advantages
Higher long-term profitability
Better emotional control
Fewer trades needed to grow account
Works in forex, crypto, stocks, and indices
Risk Reward Comparison Table (High CTR)
| Risk Reward Ratio | Win Rate Needed | Profit Potential | Suitable For |
|---|---|---|---|
| 1:1 | 60%+ | Low | Beginners (learning phase) |
| 1:2 | 45–50% | Medium | Intermediate traders |
| 1:3 | 30–35% | High | Consistent traders |
| 1:4 | 25–30% | Very High | Advanced traders |
How to Calculate 1:3 Risk Reward (Step-by-Step)
Step 1: Decide Your Risk Per Trade
Professional traders risk 1–2% of their account per trade.
Example:
Account size: $1,000
Risk per trade: 1% = $10
Step 2: Set Stop Loss
Your stop loss should be based on:
Support & resistance
Market structure
Previous highs/lows
Example:
Stop loss: 20 pips
Step 3: Set Take Profit (3x Risk)
If stop loss = 20 pips
Take profit = 60 pips
This automatically creates a 1:3 risk reward setup.
1:3 Risk Reward Forex Trading Example (Real Case)
Example: EUR/USD Buy Trade
Entry price: 1.1000
Stop loss: 1.0980 (20 pips)
Take profit: 1.1060 (60 pips)
Risk: $10
Reward: $30
Even if this trade loses, one winning trade can cover three losses.
Win Rate vs Risk Reward (Truth Beginners Ignore)
Many beginners focus only on win rate, but professionals focus on expectancy.
Expectancy Formula
Expectancy = (Win % × Avg Win) − (Loss % × Avg Loss)
With 1:3 risk reward:
Win rate: 40%
Loss rate: 60%
Result: Still profitable.
Best Market Conditions for 1:3 Risk Reward Strategy
This strategy works best when:
Market is trending
Clear support & resistance levels exist
Volatility is healthy
Best Trading Sessions
London session
New York session
Best Timeframes for 1:3 Risk Reward
| Timeframe | Suitable? | Reason |
|---|---|---|
| M5 | High noise | |
| M15 | Needs experience | |
| H1 | Balanced | |
| H4 | Strong structure | |
| Daily | Best for swing trading |
Common Mistakes Traders Make With 1:3 Strategy
Moving stop loss emotionally
Closing trades early
Forcing trades without confirmation
Overtrading
Discipline is key for success.
Risk Management Rules You Must Follow
Risk max 1–2% per trade
Never remove stop loss
Avoid revenge trading
Follow one strategy consistently
Is 1:3 Risk Reward Good for Beginners?
Yes, it is one of the best strategies for beginners because it teaches:
Patience
Discipline
Long-term thinking
However, beginners must accept that:
They will lose many trades
Profits come over time
Can 1:3 Risk Reward Strategy Fail?
No strategy is perfect. The 1:3 strategy can fail if:
Market is ranging
Entries are poor
Risk rules are broken
Combining it with trend confirmation increases success rate.
FAQs – 1:3 Risk Reward Trading Strategy
What is a 1:3 risk reward ratio?
A 1:3 risk reward ratio means risking one unit of capital to gain three units of profit on a single trade.
Is 1:3 risk reward profitable?
Yes, even with a win rate of around 35–40%, traders can be profitable using a 1:3 risk reward strategy.
Which market is best for 1:3 risk reward strategy?
Forex and indices work best due to clear trends and high liquidity.
How many trades should I take per day?
Quality matters more than quantity. 1–3 high-quality setups per day are enough.
Can I use indicators with this strategy?
Yes, but price action and structure should remain the primary focus.
Final Thoughts
The 1:3 risk reward trading strategy is not a shortcut to quick money, but it is a professional-level approach that builds consistency over time. When combined with proper risk management, patience, and discipline, it can transform the way you trade.
Focus on execution, not emotions — and let probabilities work in your favor.
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