#风险回报比

Risk-Reward Ratio = Expected Return ÷ Expected Risk

For example, if you expect to earn 100 dollars (return) on an investment, but if the investment fails, you will lose 50 dollars (risk), then the risk-reward ratio is 2:1.

How to apply:

1. Ideal Ratio

Generally, the higher the risk-reward ratio, the better. For instance, a ratio of 2:1 means for every unit of risk taken, you can earn 2 units of return. This ratio is more ideal as it allows you to achieve stable returns in the long term.

2. Set Reasonable Goals

Before investing, clearly set your return and risk goals. Make choices based on these goals to ensure that the risks are within acceptable limits.

3. Assess the Risk of Each Trade

In trading, understand the risk-reward ratio of each trade to avoid investments that have excessive risks and low rewards.

Remember, the risk-reward ratio is a tool that helps you measure investment rationality and risk control, assisting you in maintaining a stable mindset in investing and making wiser decisions.

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