#RiskRewardRatio The hashtag #RiskRewardRatio is all about evaluating the potential profit of a trade or investment compared to its potential loss. It’s a key concept in trading and investing used to assess whether a trade is worth taking.

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What Is Risk-Reward Ratio?

The Risk-Reward Ratio (RRR) compares the amount you could lose (risk) to the amount you could gain (reward).

Formula:

Risk-Reward Ratio = Potential Loss / Potential Gain

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Example:

You buy a stock at $100

Your stop-loss is at $95 (risk = $5)

Your profit target is $115 (reward = $15)

Risk-Reward Ratio = $5 / $15 = 1:3

This means you risk $1 to potentially make $3. That’s generally considered a good trade setup.

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Ideal RRR?

Most traders aim for at least 1:2 or 1:3

The higher the RRR, the fewer winning trades you need to be profitable

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Why It Matters:

Helps filter out bad trades

Keeps emotions in check

Aligns trades with your overall risk management plan

Want a calculator or template to quickly assess risk-reward on your trades?