The risk-reward ratio is a vital metric for any trader aiming to protect capital and maximize profits. A favorable ratio, such as 1:3, means risking $1 to potentially earn $3. This helps filter out poor trade setups and promotes disciplined trading. Without a clear risk-reward strategy, traders may fall into emotional decisions or overtrading. The key is not only identifying high-reward opportunities but also knowing when the potential risk outweighs the gain. Implementing consistent risk-reward analysis builds a more sustainable trading approach, especially in volatile markets like crypto. Always define risk before entering any position to stay ahead.
