The risk/reward ratio is a lie. It is a fun fantasy,

Risk-Reward

Apples and Unicorns; The 'Risk/Reward' Ratio ...is a LIE (unless you're an unusual kind of trader). 


The risk/reward ratio is a lie. It is a fun fantasy, but because one of its components has a horn, it does not exist. If a salesman calls you up (I won't even call him or her a broker) and tells you he has a dynamite trade in Wheat, as evidenced by the risk/reward ratio of 8 to 1 profit to risk, just say no. It is NOT real. Take that trade only if there is something else out there that's convincing.


Don't compare the risk/reward ratio (i.e. don't take the expected risk on a trade and comparing it to the expected return) - use the risk/account ratio instead (i.e. the amount you're risking to the amount in your account).


Read more here:
http://www.financial-spread-betting.com/Risk-reward.html