#RiskRewardRatio The Risk/Reward Ratio is a key metric in trading that compares potential profit to potential loss. It’s calculated by dividing the potential loss by the potential gain.

Example:

If you risk $100 to potentially earn $300, your risk/reward ratio is 1:3 — meaning for every dollar you risk, you stand to gain three.

How to Use It Effectively:

Define your trade setup: Set precise entry, take-profit, and stop-loss levels.

Do the math: Risk ÷ Reward = Your ratio.

Refine your strategy: Look for opportunities with favorable ratios — ideally 1:3 or better.

This simple yet powerful tool helps you manage risk smartly and optimize returns over the long run.