Traders obsess over being 'right' more often than not. But a trader who wins only 40% of the time can be far more profitable than one who wins 70% — it all comes down to risk-reward ratio.
The ratio between how much you risk (distance to stop-loss) and how much you stand to gain (distance to target). A 1:3 ratio means you risk ₹100 to potentially make ₹300 on each trade.
With a 1:3 risk-reward ratio, you only need to win 26% of your trades to break even — every trade above that win rate is pure profit. This is why professional traders prioritize ratio over accuracy.
A trader with a 70% win rate but a 1:1 risk-reward (or worse, cutting winners short and letting losers run) can still bleed capital. Three big losses can erase ten small wins if the ratio is unfavorable.
Before entering any trade, identify your stop-loss and target first. If the resulting ratio is worse than 1:2, consider skipping the trade entirely — a good ratio is often more important than being right.
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