Trader A has a win percentage of 75% on all trades while trader B has a win percentage of closer to 40% on all trades. Which trader is more profitable? Of course we can't answer that as we don't know how much each trader makes when they are right compared to how much they lose when they are wrong. So the win percentage is not the most important factor in trading. I'm sure that we would all like to win most of our trades, but if our goal is to be profitable, then there is more to the equation. It is called the risk:reward ratio and is one of the most important aspects of money management and a key to becoming a consistently profitable trader. Let's take a look at some examples:

If you risk 100 pips and look for 300 pips in profit, your risk:reward ratio is 1:3 or one pip of risk for every three pips in potential profit.

If you risk 100 pips and look for 200 pips in profit, your risk:reward ratio is 1:2 or one pip of risk for every two pips in potential profit.

If you risk 100 pips and look for 100 pips in profit, your risk:reward ratio is 1:1 or one pip of risk for every one pip in potential profit.

If you risk 100 pips and look for 50 pips in profit, your risk:reward ratio is 2:1 or two pips of risk for every one pip in potential profit.

If you risk 100 pips and look for 25 pips in profit, your risk:reward ratio is 4:1 or four pips of risk for every one pip in potential profit.