#RiskRewardRatio The risk-reward ratio is a key concept in trading and investing, measuring the potential profit of a trade relative to its possible loss. It’s calculated by dividing the expected risk (loss) by the expected reward (gain). For example, a 1:3 ratio means risking $1 to potentially gain $3. Traders use this ratio to assess if a trade is worth taking. A favorable risk-reward ratio helps maintain profitability over time, even with a lower win rate. Successful traders often aim for ratios of 1:2 or higher. It’s essential for managing risk and developing a disciplined, long-term trading strategy.