In Binance (or any trading platform), the risk-reward ratio (RRR) is a key metric used by traders to evaluate the potential profit of a trade relative to its possible loss.
Formula:
\text{Risk-Reward Ratio} = \frac{\text{Potential Loss (Risk)}}{\text{Potential Profit (Reward)}}
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How to Calculate It:
1. Entry Price: The price at which you enter the trade.
2. Stop-Loss Price: The price where you will exit the trade if it goes against you.
3. Take-Profit Price: The price where you will exit the trade to take profits.
\text{Risk} = \text{Entry Price} - \text{Stop-Loss Price}
\text{Reward} = \text{Take-Profit Price} - \text{Entry Price} ]
Then plug into the RRR formula.
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Example:
Entry Price: $100
Stop-Loss Price: $95 (risk = $5)
Take-Profit Price: $115 (reward = $15)
\text{RRR} = \frac{5}{15} = 1:3
This means you risk $1 to potentially make $3.
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Using RRR in Binance:
On Binance:
When setting a Limit or Stop-Limit order, you can manually define your stop-loss and take-profit.
Some tools like Binance Futures allow you to set both in one trade.
You can also use third-party tools or TradingView charts (connected to Binance) for better RRR visualizations and planning.
Want help with calculating RRR for a specific trade setup?
