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A risk-reward ratio is a crucial aspect of trading. It helps you evaluate the potential profit and loss of a trade. A common risk-reward ratio is 1:2, meaning you're willing to risk $1 to potentially gain $2. This ratio can vary depending on your trading strategy and risk tolerance. To calculate your risk-reward ratio, divide the potential profit by the potential loss. For example, if you're risking $100 to potentially gain $200, your risk-reward ratio is 1:2. Adjust your ratio according to your trading goals and risk management strategy.