#RiskRewardRatio

Risk/Reward Ratio (R/R): Compares potential profit to potential loss on a trade. Aim for a higher ratio (e.g., 2:1, 3:1) where potential gains significantly exceed potential losses.

Formula: Potential Profit / Potential Loss

Binance Example:

* Trade: Buy BTC at $30,000.

* Target (Take Profit): $31,000 (+ $1,000 potential profit).

* Stop Loss: $29,500 (- $500 potential loss).

* R/R Ratio: $1,000 / $500 = 2:1. This means for every $1 risked, the potential profit is $2.

Using Binance:

* Manual Calculation: Determine your entry, target, and stop-loss prices, then calculate the ratio.

* Binance Chart Tool: Utilize the "Long/Short Position" tool. Set your entry, stop-loss, and take-profit levels directly on the chart to see the R/R visually.

Importance: Focusing on trades with favorable R/R improves your chances of profitability over time, even if not every trade is a winner. It's a key element of sound risk management.