#RiskRewardRatio

The Risk-Reward Ratio (#RiskRewardRatio) is a financial analysis tool used by investors and traders to assess the feasibility of entering an investment deal. This ratio measures the expected return compared to the potential risk.

The ratio is calculated using the formula:

Risk-Reward Ratio = (Potential Loss) ÷ (Expected Profit)

Example: If you invest in a deal where you could lose $100 and aim to achieve a profit of $300, the ratio would be 1:3, meaning you risk one dollar to gain three.

The goal of using this ratio is to make smart investment decisions, so that investors do not enter into trades where the return is not worth the risk.

Experts often recommend a ratio of 1:2 or higher to ensure a good balance between risk and reward.

This tool is essential in capital management and risk control, especially in volatile markets like stocks and cryptocurrencies.