#RiskRewardRatio

The risk-reward ratio is a tool used by traders and investors to measure the potential profit of a trade relative to its possible loss. It’s calculated by dividing the expected loss (risk) by the expected gain (reward). For example, a 1:3 ratio means risking $1 to potentially earn $3. A good risk-reward ratio helps manage risk and improve long-term profitability by ensuring that potential rewards outweigh the risks taken.