#RiskRewardRatio Why the Risk-Reward Ratio Should Guide Every Trade
One of the most powerful tools in trading isn’t an indicator or a signal—it’s a decision framework. That’s what the Risk-Reward Ratio (RRR) offers.
The Risk-Reward Ratio helps you measure how much you’re risking on a trade compared to how much you stand to gain.
It’s calculated like this:
RRR = Potential Loss / Potential Gain
For example, risking $50 for the chance to make $150 gives you a 1:3 ratio.
This simple metric has transformed the way I trade.
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How I Use It:
• Before I enter any trade, I mark:
• Entry point
• Stop-loss level (risk)
• Take-profit level (reward)
• I use tools like Fibonacci levels, support & resistance zones, and ATR (Average True Range) to place stops logically—not emotionally.
• Platforms like TradingView have a built-in position size tool that visually calculates your RRR on the chart, which is a game changer.
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Why It Matters:
• It filters out bad trades—those with high risk and low reward
• It keeps you profitable even with a lower win rate.
Example: With a 1:3 ratio, you only need to win 3 out of 10 trades to break even
• It builds emotional discipline, because your trades are based on logic, not feelings
• It helps you think like a fund manager—not a gambler
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Personal Insight:
When I stopped focusing on “how many pips I can catch” and started focusing on the quality of each setup, things changed. I no longer chase trades. I wait for those that offer a minimum 1:2 or 1:3 RRR—and my consistency has improved because of it.
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Trading isn’t about being right every time. It’s about managing risk, maximizing reward, and staying disciplined.
What RRR do you aim for on your trades?