#RiskRewardRatio The Risk-Reward Ratio is a key concept in trading and investing that compares the potential profit of a trade to its potential loss. It helps traders assess whether a trade is worth taking. For example, a 1:3 ratio means risking $1 to potentially gain $3. A favorable risk-reward setup increases the chance of long-term profitability, even with a lower win rate. Smart traders focus on maintaining a high reward relative to risk, aligning trades with strategic setups and proper risk management. Always aim for consistency over perfection.