#RiskRewardRatio Understanding the Risk-Reward Ratio in Trading

The risk-reward ratio is a key concept in trading that helps investors manage potential losses against possible gains. It compares how much a trader is willing to risk to how much they expect to earn. For example, a 1:3 ratio means risking $100 to potentially make $300.

Smart traders use this ratio to plan trades wisely, aiming for high rewards with lower risks. It helps avoid emotional decisions and builds long-term profitability. The ideal ratio depends on your strategy, but higher reward potential with controlled risk is always the goal.