#RiskRewardRatio The risk-reward ratio, also known as the risk-return ratio, is a financial metric that compares the potential risk of an investment to its expected return, expressed as a ratio of potential reward to potential loss.

Here's a more detailed explanation:

What it is:

The risk-reward ratio helps investors assess whether a potential investment is worth the risk by quantifying the relationship between potential losses and potential gains.

How it's calculated:

You calculate it by dividing the potential profit (reward) by the potential loss (risk).

Example:

If you risk $100 and potentially gain $300, the risk-reward ratio is 1:3 or 3:1