5:1 Risk-Reward Ratio Rule
The 5:1 Risk-Reward Ratio Rule reflects how a trader manages risk. The rule means that your stop-loss (risk) must not exceed your take-profit (reward) by more than five times. The calculation uses the actual drawdown and the final result for each position.
For example, if the drawdown on an open position was $1,000 but you ended the trade with a profit of $100 (a 10-to-1 ratio), the rule is violated.
You can check the risk value for closed positions in market watch → component → statement → positions → risk.
This metric is calculated within one hour after the position is closed.
The calculation is based on the formula: Drawdown / P&L = Risk.
The Risk parameter (risk-to-reward ratio) must not exceed 5.
The purpose of the rule is to ensure that the risk a trader takes is justified by the outcome. If a trader sits through large drawdowns and then collects a small profit (risk exceeds reward by more than five times), the rule may be breached. We want traders to use a sound risk-management system to avoid chaotic or random results. Trades that break the rule may result in a denial of the withdrawal request.
Example:
A trader sets a $2,000 stop-loss and a $4,000 take-profit. After the position is opened, the unrealized result reaches –$1,000. The price then moves back above the entry level and the trader closes the position with a +$100 profit. The actual risk-reward ratio for this position is $1,000 / $100 = 10, which exceeds the maximum allowed value of 5.
We recommend using bracket orders when opening a position so you can see the exact risk-reward ratio while setting the stop-loss and take-profit levels. The ratio must not be higher than 5.
For example, if the drawdown on an open position was $1,000 but you ended the trade with a profit of $100 (a 10-to-1 ratio), the rule is violated.
You can check the risk value for closed positions in market watch → component → statement → positions → risk.
This metric is calculated within one hour after the position is closed.
The calculation is based on the formula: Drawdown / P&L = Risk.
The Risk parameter (risk-to-reward ratio) must not exceed 5.
The purpose of the rule is to ensure that the risk a trader takes is justified by the outcome. If a trader sits through large drawdowns and then collects a small profit (risk exceeds reward by more than five times), the rule may be breached. We want traders to use a sound risk-management system to avoid chaotic or random results. Trades that break the rule may result in a denial of the withdrawal request.
Example:
A trader sets a $2,000 stop-loss and a $4,000 take-profit. After the position is opened, the unrealized result reaches –$1,000. The price then moves back above the entry level and the trader closes the position with a +$100 profit. The actual risk-reward ratio for this position is $1,000 / $100 = 10, which exceeds the maximum allowed value of 5.
We recommend using bracket orders when opening a position so you can see the exact risk-reward ratio while setting the stop-loss and take-profit levels. The ratio must not be higher than 5.
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