#RiskRewardRatio
The Risk-Reward Ratio: A Core Pillar of My Trading Strategy
In my trading approach, the risk-reward ratio is absolutely essential. Before entering any position, I always make sure that the potential reward justifies the risk I'm taking. Personally, I never take a trade with a ratio lower than 1:2, and I aim for 1:3 or higher whenever the market context allows it.
To calculate it, I first identify my entry point, then place a stop-loss below a key support or above a resistance, depending on the direction of the trade. I then set my take-profit at a logical level that aligns with my desired risk-reward ratio.
I mainly use Fibonacci retracement levels, price action, and liquidity zones to refine my targets. For example, in a recent EUR/USD trade, I risked 50 pips to target 150 pips profit, based on a rejection from the 61.8% Fibonacci level. The trade hit my target perfectly and aligned with my strategy.
Since I started applying this ratio consistently, my discipline has improved significantly, and so have my results. It’s helped me focus only on high-quality setups and avoid emotionally driven trades.