#RiskRewardRatio

#RiskRewardRatio (or Risk-to-Reward Ratio) is a key concept in trading and investing that helps you measure how much potential profit you're aiming for compared to how much you're risking.

Formula:

Risk/Reward Ratio = Potential Loss / Potential Gain

Example:

You risk $100 on a trade (your stop-loss).

Your target profit is $300.

Risk/Reward Ratio = 1:3

That means you're risking $1 to potentially make $3 — a favorable ratio.

Why it's important:

Helps you evaluate if a trade is worth taking.

Encourages disciplined decision-making, rather than emotional moves.

Professional traders often aim for at least 1:2 or better (risking $1 to make $2 or more).

Even with a 50% win rate, a solid risk/reward ratio can still make you profitable.