Risk to Reward Ratio Explained - Why 1:3 Makes You Profitable at 30% Win Rate
Disclaimer: This content is for educational purposes only and is not financial advice. I am not a licensed financial advisor. Trading involves high risk and you can lose money.
Red Rope vs Green Target: Why 1 to 3 Math Makes You Profitable Even When You Lose 7 Out Of 10
Most beginners obsess over green win rate. They want to win 8 out of 10 ropes. Pro knows secret: you can lose 7 out of 10 ropes and still floor grows. How? With red vs green math. This is most important math on my floor, and today at AmeriMonde Trading I will explain why 1 to 3 changes everything. I learned this after tracking 100 ropes on grid paper.
What Is Red vs Green Math?
Red vs green math, book calls R Multiple or RR, measures how much red rope you allow to be eaten compared to how much green target you aim to take. If you allow $100 red to be eaten to aim $100 green, your math is 1 to 1. You risk 1 unit to make 1 unit. If you allow $100 red to aim $300 green, math is 1 to 3. You risk 1 unit to make 3 units.
R stands for your red unit. If your red per idea is $200 (2% of $10,000 floor), then 1R = $200 red allowed. So 3R = $600 green target. Beginners think I need high green win rate to make money. Professionals think I need high green vs red math to make money. Trader with 40% green rate and 1 to 3 math is much more profitable than trader with 70% green rate and 1 to 1 math. Grid paper proves it.
The Math That Shocks Beginners On My Grid Paper - 1 to 1 vs 1 to 3
LEFT: BAD TRADER 1 to 1 MATH - Needs 60% Green Rate:
Bad traders use 1 to 1. They risk 50 pips red to make 50 pips green. They think this safe. But look at grid math: To break even at 1 to 1 you need 50% green rate. To be truly profitable after fees and mistakes you need 60%+ green rate. Very hard to keep long term. Even pros have losing streak of 4-5 reds. With 1 to 1, red streak destroys floor.
Example 10 ropes with 1 to 1:
6 greens x 1R = +6R
4 reds x 1R = -4R
Net = +2R (Only +2R profit even with 60% greens! You worked hard for 10 ropes for small profit. And if you had 5 greens and 5 reds, net = 0R. No profit at all.)
Break-even green rate = 50% for 1 to 1. Real profitability needs 60%+.
RIGHT: SMART TRADER 1 to 3 MATH - Needs Only 30% Green Rate:
Smart traders use 1 to 3. They risk 50 pips red to make 150 pips green. Look at magic: To break even at 1 to 3 you need only 25% green rate! Yes, you can lose 75% ropes and still break even. To be profitable you only need 30% green rate. This easy to achieve with good floor plan.
Example 10 ropes with 1 to 3:
3 greens x 3R = +9R
7 reds x 1R = -7R
Net = +2R PROFIT! You lost 7 out of 10 ropes but still made +2R profit. Same profit as 60% green rate trader but you only won 3 ropes!
Break-even green rate = 25% for 1 to 3. Profitable at just 30% greens! This why pros love high green vs red. Small green outweighs reds. This is power of grid math.
How To Get 1 to 3 Red vs Green In Real Market On Floor?
Theory easy, execution hard. How you actually get 1 to 3 in real market without red getting hit or green never reaching?
Step 1 - Use Correct Red Rope Beyond Pile: As we taught last post, place red rope beyond pile, not inside. Good red placement beyond ceiling/floor gives you defined 1R. If red too tight you get hunted. If too wide you risk too much. Beyond pile is perfect. On my floor I place red 15 pips beyond black ceiling rope, that defines 1R distance.
Step 2 - Enter After Pile Grab For Better Math: Smartest entry for high green vs red is entry after pile grab. When price sweeps sell pile below floor, then reverses, you enter long. Your red is below grab zone small risk, and your green target is opposite pile buy pile above ceiling. This naturally creates 1 to 3, 1 to 4, even 1 to 5 because you entered at extreme discount. On my floor I wait for long lower thread to 1.0705 grab, then enter at 1.0725, red at 1.0690 35 pips, target at ceiling 1.0820 95 pips = 1 to 2.7.
Step 3 - Target Opposite Pile Not Random Price: Don't target random price. Target opposite pile pool. If you buy from sell pile below floor, target buy pile above ceiling. This is where big players will take profit. This distance naturally gives you 1 to 3. I mark opposite pile with yellow highlighter on grid.
Step 4 - Use 50% Pullback Of Big Rope For Better Math: Instead of entering on candle close, wait for 50% pullback of big engulfing green rope. Your red smaller, so your green vs red becomes bigger. Example close entry gives 1 to 2, but 50% entry gives 1 to 3.5 on same trade. On my floor I measure big green rope with ruler, mark 50% with pencil, wait price to come to 50%, then enter.
Red vs Green Psychology - Why Traders Close Green Early
Why traders close green early and hold red? Because they fear losing green. They take 0.5R green instead of waiting for 3R. Then they hold -1R red hoping it comes back to -3R red loss. This is reverse math: risk 3 to make 0.5. Guaranteed to blow floor.
Professional rule on my wall: Never close green early. If you planned 1 to 3, let it go to 1 to 3 or breakeven. Use breakeven after price moves 1R in green profit. Move red to entry after 1R green, so trade becomes risk-free. Then let it run to 3R. I write on tape: 1R GREEN = MOVE RED TO ENTRY.
Another trap: Taking green at 1 to 1 because you scared. If you do this you turn your 1 to 3 system into 1 to 1 system. You now need 60% green rate instead of 30%. You making job twice as hard. Solution: Set and forget. Place red and green target, close laptop. Don't watch every rope. Watching makes you emotional. Set alert and walk away from floor.
How Many R Per Month Do Pros Make On Floor?
Forget dollar goals. Pros track R per month on grid.
Beginner goal: 4R to 6R per month is excellent. That means if 1R = $200, you make $800 to $1200 per month.
Intermediate: 8R to 12R per month
Advanced: 15R+ per month
With 1 to 3 system, you only need 2 green wins of 3R each to make 6R, even if you had 4 red losses -4R. Net = +2R. With 3 wins 9R and 5 losses -5R in month, net = +4R. Profitable month with only 37.5% green rate! Track your ropes in journal: Date, Pair, Entry, Red, Green Target, Red vs Green, Result in R. After 30 ropes calculate average Red vs Green and green rate. You will see magic.
Common Red vs Green Mistakes That Broke My Floor Before
Mistake 1 - Unrealistic Green: Targeting 1 to 10 on every rope. Price never reaches. Use 1 to 2 to 1 to 4 realistic. 1 to 3 is sweet spot on floor.
Mistake 2 - Moving Green Further After Profit: Greed makes you move green target from 1 to 3 to 1 to 5 after trade in profit. Then price reverses and hits breakeven. Stick to plan on grid paper.
Mistake 3 - Not Accounting For Spread: On forex spread eats 0.5R. So your 1 to 3 becomes 1 to 2.5 after spread. Factor this in calculation.
Mistake 4 - Fixed Pips Target: Using 30 pips red and 90 pips green for every pair. Volatility different. Gold 30 pips is noise, EURUSD 30 pips is big move. Use structure based targets beyond pile.
Mistake 5 - Ignoring Rope Psychology: If big green engulfing forms, your green vs red improves. If doji forms, reduce green expectation. I check rope body on floor.
Final Formula - 20 Rope Challenge
Here is your challenge: Take 20 ropes on practice floor with strict rules:
- Risk 1% per rope 1R
- Red beyond pile from Post 19
- Green target 1 to 3 minimum
- Only trade after pile grab
- Log every rope
Even if you win only 7 out of 20 35% green rate:
7 wins x 3R = 21R
13 losses x 1R = -13R
Net = +8R profit with 35% green rate! If 1R = $20 (1% of $2000 floor), you made $160 profit losing 13 ropes. This proves you don't need to be perfect. You need to be mathematical.
Conclusion - Math Is Your Edge On Floor
Retail tries to be right. Pro tries to be profitable. Being right 60% with 1 to 1 makes you stressed and barely profitable. Being right 35% with 1 to 3 makes you relaxed and nicely profitable. Choose math over ego.
This trilogy completes your risk education: Post 18 - 2% Rule how much red to risk, Post 19 - Red Placement where to risk, Post 20 - Red vs Green how much green to make vs red. Master these three and you have complete professional safety system that banks use on floor.
READ MORE → Risk Management 2% Rule | Where To Place Red Safety Rope | Liquidity Hunt Trap Reverse | Universal Model 1D Bias | Time Frame Guide 2026 | Candle Formation
More at www.amerimondetrading.com - Personal rope journal with grid drawings
📈 Read More on AmeriMonde Trading:
- What My Hand Drawn Chart Shows: Hanging Man Pattern — My hand drawn journal for this reversal candle.
- Where to Place Stop Loss: Smart Money Concept — How I pair stop loss with 1:3 risk to reward.
- Past Performance & Disclaimer
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