when the risk return ratio is abnormally low it could suggest that the potential gain is disproportionately large relative to the potential risk which may indicate that the investment is riskier than it might appear this is why some investors may approach investments with very low risk return ratios with caution as a low ratio alone does not guarantee a good investment 
example of the risk reward ratio in useconsider this example a trader purchases 100 shares of xyz company at 20 and places a stop loss order at 15 to ensure that losses will not exceed 500 also assume that this trader believes that the price of xyz will reach 30 in the next few months in this case the trader is willing to risk 5 per share to make an expected return of 10 per share after closing the position since the trader stands to make double the amount that they have risked they would be said to have a 1 2 risk reward ratio on that particular trade derivatives contracts such as put contracts which give their owners the right to sell the underlying asset at a specified price can be used to similar effect if an investor prefers to seek a 1 5 risk reward ratio for a specified investment five units of expected return for each additional unit of risk then they can modify the stop loss order and thus adjust the risk reward ratio but it is important to understand that by doing so the investor has changed the probability of success in their trade in the trading example noted above suppose an investor set a stop loss order at 18 instead of 15 and they continued to target a 30 profit taking exit by doing so they would certainly reduce the size of the potential loss assuming no change to the number of shares but they will have increased the likelihood that the price action will trigger their stop loss order that s because the stop order is proportionally much closer to the entry than the target price is so although the investor may stand to make a proportionally larger gain compared to the potential loss they have a lower probability of receiving this outcome 