Your risk reward ratio is how much you risk per trade, relative to how much expect to make.
When trading you want to a bigger reward than your risk per trade.
A good rule is to only risk 1% per trade.
Following the rule means you never risk more than 1% of your account value on a single trade.
This does not mean that if you have a $10,000 trading account, you can only take a $100 position, which is 1% of $10,000.
You can use all of your capital on a single trade, or even more if you utilize leverage.
By using the 1% risk rule means you apply risk management to avoid a losses more than 1% of your trading account.
In forex trading, it is impossible to win every trade, and the 1% risk rule helps protect your account when you lose. If you risk 1 percent of your trading account on each trade, you would need to lose 100 trades in a row to blow your account.
If beginner traders followed the 1% rule, many would be successfully their first trading year.
Risking 1% per trade may seem like a small amount to some people, but it can still provide great returns.
If you risk 1 percent, you should preferably set your take profit to 2 percent or more.
When swing or day trading, gaining a few percentage points on your account each day is possible when using this simple rule, even if you only win half of your trades.