#RiskRewardRatio

To calculate the risk-reward ratio for a trade:

1- Identify your Risk: Determine the potential loss per share/unit if your stop-loss price is hit. This is your (Entry Price - Stop-Loss Price).

2- Identify your Reward: Determine the potential profit per share/unit if your target price is reached. This is your (Target Price - Entry Price).

3-Calculate the Ratio: Divide the potential Reward by the potential Risk.

For instance, if you risk losing $1 per share (Risk) to potentially gain $3 per share (Reward), your ratio is $3 / $1 = 3. This is usually written as 1:3 (Risk:Reward).