#RiskRewardRatio

The Risk/Reward Ratio is a crucial tool for investors and traders to evaluate potential profits against possible losses. It's calculated by dividing the potential loss by the potential gain, helping you decide if a trade aligns with your risk tolerance and expected returns. A lower ratio (below 1) is generally considered better, indicating higher potential returns compared to risk. To optimize this ratio, consider strategies like diversification, customized stop-loss orders and continuous monitoring. Understanding your risk appetite and investment goals is key to making informed decisions and achieving financial success ¹.