#RiskRewardRatio In trading and investing, the risk-reward ratio is a fundamental concept that compares the potential profit of a trade to its potential loss. This ratio helps investors assess whether the potential reward justifies the risk taken.

For instance, a 1:3 risk-reward ratio means that for every unit of risk (e.g., $1), there's a potential to gain three units (e.g., $3). Visual representations of this concept often depict scales or charts balancing risk and reward. Understanding and utilizing the risk-reward ratio is crucial for effective risk management and informed decision-making in trading.