#RiskRewardRatio Risk-Reward Ratio

The Risk-Reward Ratio (RRR) is a fundamental concept in trading and investing used to evaluate the potential return of a trade relative to its risk. It compares the amount a trader stands to lose (risk) to the amount they could gain (reward). For example, a ratio of 1:3 means risking ₹1 to potentially earn ₹3. Traders use this ratio to make informed decisions and maintain discipline in their strategies. A favorable RRR ensures that even if only a portion of trades are successful, the overall portfolio remains profitable. By setting clear stop-loss and target levels, traders can manage risk effectively and avoid emotional decision-making. While a high RRR is desirable, it should be paired with a high probability of success. Consistently applying the risk-reward ratio improves long-term outcomes and helps in building a sustainable trading approach, whether in stocks, futures, or options.