#RiskRewardRatio

The risk-reward ratio is a key concept in investing and trading that compares the potential loss (risk) to the potential gain (reward) of an investment. It helps investors assess whether a trade is worth taking. For example, a ratio of 1:3 means risking $1 to potentially gain $3. A lower ratio is generally more attractive, as it indicates higher potential reward for less risk. Smart investors use this ratio to manage risk and make informed decisions. It’s a vital tool in developing disciplined strategies, ensuring that over time, profitable trades outweigh the losses, leading to long-term financial success.