What are the most common mistakes when calculating risk-reward ratio?

Psychology asides, the next big thing to emphasize in trading is risk management where risk-reward ratio is the deal. Ambiguity of this idea should be simplified for traders. The market structure should determine your reward and risk appetite. Even if you want as low as 20 pips in the market and the structure is not showing such price delivery in anticipation, then the 20 pips is not the problem, it is how you see the market structure and what time frame you are seeing it. The second part is, trader can follow their intuition to know when to take their profit in relation to their daily target. Which means if I want 50 pips and the structure shows potential to deliver 100 and market gives me my daily target, I am contented with that.

The most common mistakes when calculating the risk-reward ratio include not accurately assessing potential risks, setting unrealistic reward expectations, and failing to account for transaction costs or position sizing.

In FOREX, When calculating the profit/loss ratio, it is better not to use Pips nor points. I believe it is better to use a fixed amount of money. Ex: 100 USD as stop loss. 162 USD as profit. Then, contract size must be calculated based on stop loss in dollars , divided by (number of Pips of position stop loss multiplied by pip value.) Ex: If one position stop loss is 65 Pips, and my fixed stop loss is 100 dollars, and pip value is 10 dollars, then contract size will be: 100/(65*10) ~ 0.15 lots

The probability of success can not be measured by high risk reward ratio at all times. Practically it may be overwhelming to hit 1:10 RR. I had hit that before times after times. But I know how consistent it is to hit 1:3 RR. And consistency is the game. Let your consistency be the metric of your success not high RR. As much as it is possible, try from 1:2 RR and grow from there. Keep it simple, always.

Changing of ratio after execution is what i call "fingering" on trades. Determine your risk appetite and reward before you execute, fingering of trade would be worrisome and most times induced by emotion of what you are seeing in the market, it is better to let the market breathe, do its thing. Cut out of the running trade when your intuition says so. Don't get attached emotionally to your positions. It is a great deal!!

Not considering the entry and exit costs for a short reward trade is a common mistake. Also, in my view, the underlying analysis should matter for entry and exit rather than a calculation of risk reward ratio deciding the trade.

Entry and Exit is one of the most draining part of trading if a trader has not perfected the art. The next level of that is determining RRR. As the account grows, lotsize follow suite, reward and risk in % should be maintained.

I agree the most with the Probability of Profit also known as PoP not being evaluated while considering Risk/Reward Ratio. Risk Reward Ratio in isolation cannot justify oversizing your trade in a specific security. Let us say you have a very high Reward to Risk and good Probability of Profit But taking a significantly larger position as compared to your regular trades sets you up for failure as you have not considered position sizing. Position sizing is critical particularly between entry and exit points as the MTM losses or Probability of Profits keeps on changing at every time interval. So make sure you factor in Position sizing.

A common mistake when calculating the portfolio risk-reward ratio is not considering the correlations between different assets in the portfolio. Ignoring the interdependence of various investments can lead to an inaccurate assessment of the portfolio's overall risk and potential return, potentially leading to suboptimal investment decisions. It's crucial to account for the diversification benefits and correlations among different assets within the portfolio.