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The Risk Reward Indicator is one of the MetaTrader 4 indicators that calculates the risk (Risk) and reward (Reward) levels of trades. The calculations are based on the Stop Loss, Entry Price, and Take Profit levels.
The RR Indicator computes the Risk to Reward Ratio (RRR) and displays it in the top-left corner of the chart. Additionally, it marks the Stop Loss, Entry Price, and Take Profit levels using three horizontal lines on the main chart:
- Green Line: Represents the Take Profit level
- Red Line: Represents the Stop Loss level
- Blue Line: Indicates the Entry Price
Risk Reward Indicator Specifications
The table below summarizes the key features of the Risk Reward Indicator:
| Category | Trading Tool - Capital Management - Risk Management |
| Platform | MetaTrader 4 |
| Skill Level | Beginner |
| Indicator Type | Risk & Capital Management |
| Timeframe | Multi-Timeframe |
| Trading Style | Day Trading |
| Market | Cryptocurrency - Forex - Stocks |
Bullish Market Scenario
In the GBP/NZD currency pair chart, suppose a trader enters a Buy position at 2.17851. The Stop Loss is set at 2.17527, and the Take Profit is set at 2.18527.
In this case, the indicator calculates the Risk to Reward Ratio (RRR) as 1:2.09 and displays it in the top-left corner of the chart.
Bearish Market Scenario
In the GBP/USD currency pair on a 5-minute timeframe, a trader enters a Sell position at 1.22029. Following risk management principles, the Stop Loss is set at 1.22096, and the Take Profit is placed at 1.21664.
With these settings, the RRR is 1:2.45, indicating that the potential profit is more than double the risk.
Risk Reward Indicator Settings
The following image shows the Settings Panel of the Risk Reward Indicator in MT4:
- Entry Line move with price: Adjusts the Entry Line according to price movements
- Display corner: Selects where the RRR is displayed on the chart
- Font size: Controls the font size of the displayed text
- Label color: Sets the label color
- SL color: Selects the color for the Stop Loss
- TP color: Selects the color for the Take Profit
- EP color: Selects the color for the Entry Price
- Line width: Adjusts the thickness of the lines
- Line style: Customizes the line style
- Line label font size: Sets the font size for the line labels
Conclusion
The Risk Reward Indicator accurately evaluates the Risk-Reward Ratio (RRR) of each trade.
This risk management MetaTrader 4 indicator calculates the risk as the difference between the entry point and the stop loss, and the reward as the difference between the entry point and the take profit.
What is the Risk Reward Indicator, and how does it work?
The Risk Reward Indicator calculates the Risk to Reward Ratio (RRR) for trades and displays it visually on the chart, making it easier to manage trading decisions.
How is the Risk to Reward Ratio calculated?
The RRR is determined by dividing the potential profit (the difference between the Entry Price and Take Profit) by the potential loss (the difference between the Entry Price and Stop Loss).