The concept
The ratio between potential loss and potential gain.
Why it matters
Combined with win rate, it determines long-run expectancy.
How markets interpret it
Expectancy = (win% × avg win) − (loss% × avg loss).
Key takeaways
- R:R and win rate work together.
Knowledge check
40% wins at 1:2 R:R (no costs) gives expectancy per $1 risked of about…