Why Risk-to-Reward Ratios Need Context

A 1:3 risk-to-reward ratio doesn't automatically make a trade good.

Suppose a trade risks $100 to potentially earn $300.

The numbers look attractive, but the target might be unrealistic given the market structure or current volatility.

If the trade rarely reaches that target, the theoretical reward-to-risk ratio may not translate into positive expectancy.

A more useful approach is to examine how often the setup reaches different targets before hitting its stop.

Use historical results, realistic fills, and consistent rules to estimate performance.

The goal isn't to force every trade into the same ratio.

It's to find a relationship between risk and reward that is supported by the strategy's actual behavior.