#RiskRewardRatio The Risk-Reward Ratio is a fundamental concept in investing and trading that helps evaluate the potential return of an investment relative to its risk. It is calculated by dividing the amount a trader stands to lose (risk) by the amount they stand to gain (reward). A lower ratio is generally more favorable, indicating a higher potential reward for a smaller risk. For example, a 1:3 risk-reward ratio means risking $1 to potentially earn $3. Understanding and applying this ratio helps investors make smarter decisions, manage losses, and improve long-term profitability.

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