#RiskRewardRatio The #RiskRewardRatio is a fundamental concept in trading and investment, comparing the potential profit of a trade to its potential loss. It's calculated by dividing the amount you stand to lose (the risk) by the amount you aim to gain (the reward).

For example, if you risk $100 to potentially make $300, your risk-reward ratio is 1:3. This means for every dollar you risk, you could potentially earn three dollars.

A lower ratio (e.g., 1:3 or 1:4) is generally considered more favorable as it indicates a higher potential return relative to the risk taken. Traders use this ratio to assess the attractiveness of a trade and manage their capital effectively. It helps in making informed decisions about whether the potential reward justifies the associated risk. #trading #investing #riskmanagement #financialliteracy