#RiskRewardRatio

#RiskRewardRatio is a trading concept that measures the potential profit versus the potential loss of a trade. It’s calculated by dividing the amount of risk (the difference between entry price and stop-loss) by the potential reward (the difference between entry price and target price). For example, a 1:3 risk-reward ratio means you’re risking 1 to potentially gain3. A higher ratio typically indicates a more favorable trade, as the potential reward outweighs the risk. Traders often aim for a ratio of 1:2 or higher to ensure long-term profitability while managing risks effectively.