#RiskRewardRatio

Understanding the risk-reward ratio is fundamental for any trader. This metric compares the potential profit of a trade to its potential loss, helping you make informed decisions. A common benchmark is a 1:3 ratio, meaning you aim to gain three times what you’re willing to lose. For example, risking $100 to potentially earn $300 aligns with this principle. By consistently applying a favorable risk-reward ratio, you can remain profitable even if not all trades succeed. Emotional trading often leads to ignoring this rule, but discipline is key. Always calculate your exit points before entering a trade, and stick to your plan. Over time, this strategy minimizes losses and maximizes gains, making it a cornerstone of sustainable trading.