#RiskRewardRatio The Risk-Reward Ratio (RRR) is a key concept in trading and investing, used to measure the potential return of an investment relative to its risk. It is calculated by dividing the amount of profit expected by the amount of potential loss. For example, if a trader risks $100 to make $300, the risk-reward ratio is 1:3. A favorable RRR helps traders manage their capital efficiently and make smarter decisions. Typically, traders aim for a ratio of at least 1:2 or higher, ensuring that their gains outweigh potential losses over time. However, the RRR should be considered alongside win rate and market conditions, as a high ratio doesn't guarantee success without consistent strategy and discipline. Balancing risk and reward is essential for long-term profitability, making the RRR a vital tool in any trader's strategy to assess whether a trade is worth taking or should be avoided.