#RiskRewardRatio

Risk and reward ratio - in simple terms, it is a metric that compares the potential profit from a trade with the potential loss you are willing to incur. It helps the trader assess whether the risk is worth the potential reward.

For example, if your trading strategy has a win rate below 50%, you can still be profitable in the long run if your profitable trades significantly outweigh your losing ones. For instance, with a ratio of 3:1, you only need to win just over 25% of your trades to remain in profit (not taking commissions into account).

Most traders prefer to open trades with a risk-to-reward ratio of at least 1:2 or 1:3. This means that the potential profit should be two or three times greater than the potential loss. However, this may depend on your trading strategy.

Market conditions are constantly changing, so it is important to review your trading plans, stop-loss levels, and profit targets as needed. The risk-to-reward ratio is a fundamental concept. Proper application of this metric will help you make more informed decisions.