#RiskRewardRatio The risk-reward ratio is a key concept in investing and trading, used to assess the potential profit of a trade relative to its possible loss. It is calculated by dividing the expected loss (risk) by the expected gain (reward). For example, a 1:3 ratio means risking $1 to potentially gain $3. Investors use this ratio to determine whether a trade is worth pursuing, aiming for higher rewards relative to the risks. A favorable risk-reward ratio helps manage losses and improve long-term profitability. It’s essential in maintaining discipline, especially in volatile markets, and supports smarter, more strategic decision-making.