#RiskRewardRatio

The risk-reward ratio is a fundamental concept in trading and investing, used to evaluate the potential return of an investment relative to its risk. It is calculated by dividing the expected profit by the potential loss235. For example, a 3:1 risk-reward ratio means the potential reward is three times the risk taken2. Traders use this ratio to assess whether a trade is worth pursuing, aiming to maximize returns while minimizing losses48. Proper risk management, combined with discipline and solid strategies, enhances long-term success.