#RiskRewardRatio

The Risk-Reward Ratio is a fundamental measure in the world of trading and investing, used to determine the feasibility of a trade before entering it. This ratio expresses the potential loss against the expected profit, and it is calculated by dividing the amount of risk (the difference between the entry price and the stop loss) by the potential return (the difference between the entry price and the target). For example, a ratio of 1:3 means you risk one dollar to achieve three. Smartly using this ratio enhances the chances of long-term success, even if the percentage of winning trades is lower than losing ones, as it ensures that profits outweigh losses.