#RiskRewardRatio The risk-reward ratio is a fundamental concept in trading and investing that compares the potential loss (risk) of an investment to its possible gain (reward). It helps investors evaluate whether a trade is worth taking. For example, a 1:3 risk-reward ratio means risking $1 to potentially earn $3. A favorable ratio increases the chance of profitability over time, even if not all trades are successful. Consistently applying this ratio helps maintain discipline and reduces emotional decision-making. Smart investors use it alongside other strategies to create a balanced, effective approach to managing capital and maximizing returns while minimizing potential losses.