In the world of proprietary trading, success hinges not just on the ability to find profitable trades, but on how well you manage risk and reward. Whether you're just starting your prop trading journey or aiming to scale up with firms like Plus Markets, understanding how to analyse your risk-to-reward ratio (R:R) is fundamental.
This blog breaks down how to approach R:R from a prop trader’s perspective, combining professional insights, proven strategies, and personal lessons I’ve learned along the way.
Why Risk and Reward Is Everything in Prop Trading
Prop trading firms don’t just evaluate how often you win, they assess how you win. You can pass a funded challenge with a 30% win rate if your average win is significantly larger than your average loss. On the other hand, even an 80% win rate is meaningless if one big loss wipes your account.
The key lies in analysing trades through this perspective:
- Risk = the potential amount you are willing to lose on a trade.
- Reward = the potential profit if the trade hits your take-profit target.
- Risk-to-Reward Ratio = Reward ÷ Risk
Most prop traders aim for a minimum R:R of 1:2, but this varies depending on strategy, market volatility, and confidence in your setup.
💡 Further reading: Risk Management in Trading – Investopedia
Step 1: Know Your Strategy’s Structure
Before analysing any trade, you need a clear and consistent strategy. This is where backtesting becomes critical.
When I started trading prop challenges, I often bounced between strategies. What helped me gain real traction was backtesting a simple structure, tracking win/loss streaks, drawdowns, and R:R setups over historical data.
A few things that work:
- Use platforms like TradingView or Forex Tester for strategy simulation.
- Track win rate, R:R, and maximum drawdown.
- Focus on repeatable market behaviours rather than complex indicators.
For example,
When one of my tested setups involves trading break-and-retest patterns on the 1H and 4H timeframes. I backtested this across multiple pairs and sessions to understand its R:R potential under different volatility conditions.
🔗 Backtesting Strategies That Actually Work – ForTraders
Step 2: Use Strong Risk Management
According to ForTraders, one of the top reasons traders fail funded challenges is weak risk control, not weak strategy.
With prop firms like Plus Markets, here are the essentials:
- Risk 0.5% to 1% of your capital per trade.
- Never increase lot size after a losing trade (avoid revenge trading).
- Always set hard stop-losses and define take-profit targets.
- Limit total daily loss (e.g. 3%) to protect against emotional patterns.
Personally, I stick to 1% risk per trade, with setups that offer minimum 1:2 R:R. That allows room for error without risking the account.
🔗 Risk Management Guide – BabyPips
Step 3: Log Every Trade and Track R:R Metrics
Every serious trader keeps a journal. Logging trades gives you raw data on your risk/reward habits:
- Entry, stop-loss, take-profit
- Actual outcome vs. projected R:R
- Notes on execution quality, psychology, and slippage
Over time, you’ll see patterns, like whether you're consistently hitting your expected R:R, or if your losers come from violating rules. This is where real improvement starts.
Here’s a personal example: On 12th April 2025, I shorted GBP/USD at 1.2640 with a 30-pip stop-loss and a 60-pip take-profit. I had identified a bearish order block on the 4H chart, confirmed by a lower high on the 1H. The trade respected the level and hit TP within five hours. By sticking to my rules and targeting a 1:2 R:R, I gained confidence without exposing my account to unnecessary risk.
🔗 The Ultimate Trading Journal Template – Edgewonk
Step 4: Adopt a Risk Manager’s Mindset
Traders at top-performing prop firms don’t chase trades, they manage downside. That’s why firms like Plus Markets prefer consistency over hero trades.
A professional mindset includes:
- Cutting risk during uncertainty or after multiple losses
- Not exceeding daily or weekly loss limits
- Viewing each trade as one of many in a larger probability approach.
I once ignored my stop on a "guaranteed winner," and it ended up becoming my biggest loss. Since then, I treat every trade as part of a portfolio, not an emotional bet.
To support this mindset, I’ve developed a simple daily routine: I begin each day reviewing my journaled trades from the previous session, check for key economic events, and spend 5 minutes doing a quick mental reset, no screens, just focus. This primes me for disciplined execution, especially on volatile days.
🔗 Trading Psychology: Why Discipline Matters – DailyFX
Final Thoughts
Analysing risk and reward is not just a technical process, it’s a psychological and strategic commitment. Whether you're working toward your first funded account at Plus Markets or trying to build long-term profitability, success comes down to managing risk consistently.
Here’s a quick recap checklist:
- ✅ Backtest for realistic R:R expectations
- ✅ Risk max 1% per trade
- ✅ Use stop-losses and take-profits every time
- ✅ Maintain a detailed journal
- ✅ Focus on capital preservation before profit
In the long run, success in prop trading isn’t about avoiding losses, it’s about managing them wisely, sticking to your system, and showing up with consistency, trade after trade.
