#RiskRewardRatio The risk-reward ratio is a fundamental concept used in trading and investing to compare the potential profit of a trade or investment to its potential loss. It helps investors and traders assess whether the potential returns are worth the risk taken.

How to Calculate the Risk-Reward Ratio:

The risk-reward ratio is calculated by dividing the potential loss by the potential gain:

\qquad \text{Risk-Reward Ratio} = \frac{\text{Potential Loss}}{\text{Potential Gain}}

Alternatively, it can be expressed as a ratio:

\qquad \text{Risk-Reward Ratio} = \text{Potential Loss} : \text{Potential Gain}

Understanding the Ratio:

* A risk-reward ratio of 1:1 means that for every dollar you risk, you stand to gain one dollar.#RiskAnalysis