#RiskRewardRatio

The risk-reward ratio is a crucial concept in trading and investing, helping you evaluate potential gains against potential losses. It's calculated by dividing the potential profit by the potential loss. A higher ratio indicates a more favorable trade. For example, a 2:1 ratio means you're risking $1 to potentially gain $2. This ratio helps you [1]:

- *Evaluate trades*: Make informed decisions based on potential outcomes.

- *Manage risk*: Limit losses and maximize gains.

- *Set realistic goals*: Adjust your expectations based on the ratio.

By understanding and applying the risk-reward ratio, you can refine your trading strategy and improve your overall performance.