The long-trade formula
Risk per unit is entry minus stop; reward per unit is target minus entry. If entry is 100, stop is 98, and target is 106, the distances are 2 and 6. That produces 1:3 risk to reward before trading costs.
The short-trade formula
For a short, risk is stop minus entry and reward is entry minus target. An entry at 100, stop at 102, and target at 94 has the same 1:3 ratio. The stop must be above entry and the target below it.
Break-even rate is arithmetic, not a forecast
A fixed 1:3 payoff needs 25% wins to break even before costs: one 3R win offsets three 1R losses. Real trades rarely exit at identical multiples, so use the displayed rate only as a mathematical reference.
Use a defensible target
Set invalidation where the trade idea fails, then identify the next meaningful level or exit condition. Moving the target farther away just to improve the ratio changes the arithmetic without improving the setup. Record the plan in the trading journal before the result is known.