#RiskRewardRatio The Risk-Reward Ratio is a financial metric used to assess the potential profit of an investment relative to its potential loss. It’s calculated by dividing the expected risk (loss) by the expected reward (gain). For example, a ratio of 1:3 means you risk $1 to potentially gain $3. Traders and investors use this ratio to make informed decisions, aiming for setups where the reward outweighs the risk. A good risk-reward ratio helps manage losses and improve long-term profitability. It's especially important in trading strategies, as consistent application of favorable ratios can lead to better outcomes, even if only a few trades are successful.