As what i’ve read in the School of Pipsology,
Another way you can increase your chances of profitability is to trade when you have the potential to make 3 times more than you are risking. If you give yourself a 3:1 reward/risk ratio, you have a significantly greater chance of ending up profitable in the long run.
Now the question would be, What will happen if, just what if, the trader could not manage properly the Risk to Reward ratio… 
Now the question would be, What will happen if, just what if, the trader could not manage properly the Risk to Reward ratio.
Total meltdown of their account.
The statistics say that certain systems give results no better
than 50% ie you will lose 50 out of 100 trades, so if your risk:reward
ratio (R:R) is 1:1 (Stop loss (S/L) = Take Profit (T/P) ) you will never
make a profit.
As babypips school points out if you have a R:R of 1:3 though, you can
absorb those losing trades, even get close to being only 33% efficient &
still be in profit.
That’s really an ouch! So it would be really important to be smart when you are involve in Forex… 'coz total meltdown of accounts could hurt so much…
So it would be really important to be smart when you are involve in Forex
Understanding (or misunderstanding) money management theory is
probably the biggest problem for new traders.
As has been demonstated with a system which is 50% effective
a good trader, with a R:R of 1:3 or better, can make a profit.
There is a saying which is
Cut your losses & let your profits (winners) run.
If your Stop Loss (S/L) is 50 pips & your Take Profit (T/P) is 150 pips, then how
many losers does it take to make up one win?
Daydreamer has indicated this, but it might not be as clear as it could be because folks have a strange tendency to focus on the R:R ratio. The fact of the matter is that the R/R is completely meaningless unless it’s looked at in combination with the win %.
So say that one should shoot for a 3:1 average winner to average loser ratio can actually be destructive to one’s trading in some cases. Take the example of a system which is as a 70% win rate. Systems like that don’t often have a 3:1 type of ratio and if the trader tries to force one he/she will suffer the consequences when they could have done extremely well for themselves at a 1:1 ratio.
I guess that is really should not be taken for granted… There’s should be a better understanding on Money Management to control losses and risks…