#RiskRewardRatio Risk-Reward Ratio is a key concept in trading that compares the potential profit of a trade to the potential loss. It helps traders evaluate if a trade is worth taking.

Formula:

Risk-Reward Ratio = Potential Loss / Potential Profit

For example, if you risk $100 to potentially gain $300, your risk-reward ratio is 1:3.

A 1:2 ratio means you're risking $1 to make $2.

A 1:1 ratio means equal risk and reward.

Traders usually aim for at least 1:2 or 1:3, meaning the potential reward is 2–3 times higher than the risk. This strategy improves long-term profitability even with average accuracy. Always combine a good risk-reward ratio with proper stop-loss and trade discipline.