Risk/Reward
Definition
Risk/Reward (R:R) is the ratio of the possible loss to the possible profit on a single trade. In binary options it is fixed by the terms of the trade: the risk is the full trade amount, the reward is the payout percentage — so at an 80% payout R:R equals 1:0.8, and staying profitable over distance requires a win rate above 55.6%.
How R:R sets the break-even threshold
In binary options both sides are known before entry: a loss costs the full trade amount, a win brings the payout percentage. The ratio therefore directly determines what share of winning trades keeps the account flat: the threshold equals 1 / (1 + payout).
| Payout | R:R | Break-even win rate |
|---|---|---|
| 70% | 1:0.7 | 58.8% |
| 80% | 1:0.8 | 55.6% |
| 85% | 1:0.85 | 54.1% |
| 92% | 1:0.92 | 52.1% |
Every percentage point of payout lowers the required win rate — which is why comparing payouts across assets before entering gives more than it seems: the gap between 70% and 92% is 6.7 percentage points of required accuracy.
How it differs from R:R in forex
In forex the trader chooses the ratio — with a stop-loss and a take-profit. A "risk 1 to make 2" target is routine there, and a strategy can be profitable with a 40% win rate. Binary options are the opposite: R:R is always slightly worse than 1:1 and cannot be tuned, but you never have to estimate the size of the move — only its direction by expiration. Hence the key practical consequence: any binary options strategy needs a win rate well above 50%.
How it differs from expected value
R:R describes a single trade: what is at stake and what can be won. Expected value multiplies those amounts by probabilities and shows the average result over distance. R:R without a win rate is half the picture: a 1:0.92 ratio will not save a strategy that calls direction correctly 45% of the time.
Frequently asked questions
Can R:R be improved in binary options?
Only by choosing conditions, not by managing the trade: the ratio is set by the payout percentage for the asset and time, and stops or take-profits do not apply — the trade closes automatically at expiration. In practice that means comparing payouts across assets and trading where they are higher.
Which matters more — R:R or win rate?
Neither says anything about profitability on its own. A strategy is judged by their product — the expected value: a 60% win rate at a 70% payout is worse than a 57% win rate at a 92% payout. It is the pair that counts, not either number alone.
Why is R:R always worse than 1:1 in binary options?
Because the payout is below 100%: a loss takes the whole trade amount while a win brings only part of it. The compensation is built into the trade itself — you never need to guess how far price will go, only its direction by expiration. The ratio is the price of that simplicity.