#RiskRewardRatio

Traders often choose risk-to-reward ratios that fall within a range of 1:2 to 1:4, meaning that for every dollar you risk in a trade, you can expect to recover between two and four dollars. The amount of risk you are willing to take is a personal choice that may affect your potential returns.

Using stop-loss and take-profit orders alongside risk and reward ratios

can help maintain the desired risk-to-reward ratio by setting a stop-loss point when placing the trade order. A stop-loss order closes your trade when the price reaches the level you decide, or exceeds it, which can prevent you from losing more than you determined within your risk appetite.