Risk to reward ratio of a Telegram signal

The risk to reward ratio of a Telegram signal is the distance from entry to take profit divided by the distance from entry to stop loss. A signal with a 5 point stop and a first target 10 points away is 1:2. Most rooms print several targets, so one signal carries several ratios, and the one you actually earn depends on how your copier closes the trade.

CopySignals is a cloud Telegram signal copier for MT4, MT5 and eTrader: it reads the rooms you already follow through your own Telegram account and places the trades on your own broker account. This page shows how to work out the ratio from a post before you copy it, and what changes it between the post and your account.

How do you calculate the risk to reward ratio of a signal?

Subtract the stop loss from the entry to get the risk, subtract the entry from a take profit to get the reward, and divide the reward by the risk. For a buy the stop is below the entry, for a sell it is above, and the distances are always positive numbers.

Here is an invented example, not a real trade. The room posts: buy XAUUSD at 2330, stop loss 2325, TP1 2335, TP2 2340, TP3 2350. The risk is 5. The rewards are 5, 10 and 20. That makes 1:1 at TP1, 1:2 at TP2 and 1:4 at TP3.

Rooms like to quote the last target. "1:4" looks good in a post, but it is only the ratio if the trade runs all the way there with the full position still open.

Which take profit counts as the reward?

The one your copier actually closes at, weighted by how much of the position it closes there. With several targets, the realistic reward is the average of the targets, each multiplied by its share of the position.

CopySignals lets you split the position across the targets with custom weights, close all of it at the first target, run all of it to the last, or set no take profit. Take weights of 50, 30 and 20 percent on the example above. If all three targets are hit, the reward is 0.5 x 5 + 0.3 x 10 + 0.2 x 20 = 9.5 points against a risk of 5, so 1:1.9. The post said 1:4, and the account earns 1:1.9 because half the position left at 1:1. Our guide to split take profit weights goes through other splits, and multiple take profits explained covers the three exit styles.

The same signal copied three ways gives three different ratios if every target is reached:

• First target only: 1:1.
• Weights 50, 30, 20: 1:1.9.
• Run to the last target: 1:4.

None is correct for every room. A room whose third target is rarely reached suits an early exit. A room that posts one big target and a tight stop suits running to the last.

How does break even change the ratio?

Moving the stop to the entry after a target removes the loss on the rest of the position, and it also removes some of the reward when price pulls back to the entry before going on. It trades a lower worst case for fewer full winners.

CopySignals can move to break even after a number of targets you choose, and can close part of the position at each target. Using the same invented signal with 50, 30 and 20 percent weights and break even after TP1, here are three outcomes:

1. Price hits TP1, comes back to 2330 and stops out the rest at break even. Half the position took 5 points, the other half took 0. Net reward is 2.5 points, which is 0.5 of the original risk, a small win instead of a full loss.
2. Price hits TP1 and TP2, then returns to the entry. Net reward is 2.5 + 3 = 5.5 points, 1.1 times the risk.
3. All three targets are hit. Net reward is 9.5 points, the 1:1.9 from above.

Without break even, outcome 1 would have ended with the remaining half stopped out at 2325, a loss of 2.5 points on that half, so the half that took 5 points and the half that lost 5 net to zero. The difference between the two settings is the whole reason to test them. See break even and partial close from signal updates for how the room's follow-up messages feed this.

How often do you need to win at each ratio?

The break even share of winners is risk divided by risk plus reward, before spread and commission. At 1:1 you need to win more than half your trades. At 1:2 more than a third, because 1 / (1 + 2) is 0.33. At 1:4 more than a fifth.

That is arithmetic, not a forecast. We do not say what any room's hit rate is, and you should not infer one from a ratio in a post. A high ratio with few winners and a low ratio with many winners can end in the same place. What the ratio tells you is how often the room has to be right for you not to lose money, and the room's own history is the only place to check that.

Does the entry price change the ratio?

Yes, every point you enter late shrinks the reward and grows the risk at the same time. Using the invented signal again, if your fill is 2331 instead of 2330, the risk becomes 6 and the distance to TP1 becomes 4. The ratio at TP1 drops from 1:1 to about 1:0.67.

Two situations cause it. Rooms that post an entry zone rather than one price, covered in entry zone signals explained, give you a ratio that depends on where in the zone the trade is placed. A zone of 2330 to 2334 with the same stop at 2325 means a risk between 5 and 9 points. And a fill away from the posted price, which is the subject of slippage on a signal copier, moves the numbers in the same way.

CopySignals has a delay before placing and a maximum spread, both set per copier. A wide spread at the moment of the fill is a direct cost on the reward side of a short target, and a 5 point first target on gold feels it more than a 50 point one. Read the maximum spread filter if your room trades short targets.

What if the signal has no stop loss?

Then there is no risk figure to divide by, and no ratio. It also means the percent of account sizing method has no stop to measure against. What to do when a signal has no stop loss sets out the options, and the short version is a small fixed lot and a decision you make yourself before you copy.

Where does the ratio feed into position size?

The ratio does not set the lot, the stop does. CopySignals can size by percent of the account measured against the signal's own stop, so the money at risk stays near the same figure while the lot moves with the stop distance. The ratio then decides what that risk is worth on the way up. The arithmetic is in risk percent lot size on a signal copier. Fixed lot, a multiple of the master's lot and the master's lot scaled by balance are the other methods, and a maximum lot caps all of them.

A routine before you copy a room

Take ten recent signals from the room and write down entry, stop and each target. Work out the ratio at each target using the formula above. Then decide the exit style from what you see, set it on a demo account and let it run through a few signals. Our page on copying signals to a demo account first explains the test.

Look at the stops too. If the room's stop is wide compared with its first target, a first-target-only exit leaves you with a ratio below 1:1, and you need to win most of the trades to come out even. That is a reason to run to a later target or to skip the room, and the decision is yours. Trading carries risk and none of this predicts a result.

To set the exits and sizing on the rooms you already follow, see Telegram to MT5 with CopySignals. Every plan includes the whole product, from $14 a month, and there is a 30 day money back guarantee. The plans are on the pricing page.