✅ Lesson 3.2 – S/R Basics: Risk-Reward Ratio in Forex

“Make more when you’re right. Lose less when you’re wrong.” – That’s the core of profitable trading.

🎯 Lesson Objective

This lesson helps you understand how using support and resistance (S/R) levels can help you identify high reward–low risk trades through a simple but powerful tool: the risk-to-reward ratio (RRR).

📊 What is Risk-to-Reward Ratio (RRR)?

The Risk-to-Reward Ratio compares how much you risk (potential loss) vs. how much you stand to gain (potential profit).

• A 3:1 ratio means you’re risking 1 unit to gain 3 units.

• If you’re wrong, you lose 70 pips.

• If you’re right, you gain 210 pips.

The higher the reward relative to the risk, the fewer winning trades you need to be profitable overall.

🧱 RRR Strategy Framework

📌 Key Components:

🧠 Why It Matters

Even with a low win rate, you can be profitable if your wins are larger than your losses.

For example:

• 10 trades with 30% win rate (3 out of 10)

• Each win earns $600

• Each loss costs $200
  ✅ Profit = $1800 – $1400 = $400

🔍 Real Trade Example – August 11, 2011

• Entry: 1.4130 (short near resistance)

• Stop Loss: 1.4060 (maximum 70 pip risk)

• Take Profit: 1.4340 (target 210 pip gain)

✅ A textbook example of entering near resistance with clear exit and stop loss plans.

💡 Key Principles for Traders

• Only take trades with a favorable RRR (e.g., 2:1 or 3:1)

• Always define your stop loss before entering a trade

• Identify strong S/R zones for precise entry and exit points

• Adjust your targets based on time frame and market conditions

• Discipline matters more than strategy — the market rewards patience

⚖️ How to Protect Your Account

✅ Instructor’s Takeaway

“RRR isn’t about being right more often — it’s about being smart when you’re wrong and disciplined when you’re right. That’s the foundation of long-term trading success.”