#RiskRewardRatio

I calculate the risk-reward ratio (RRR) by identifying my entry point, stop-loss level, and target profit level before entering a trade. The formula I use is:

Risk-Reward Ratio = (Target Price – Entry Price) / (Entry Price – Stop-Loss Price)

For example, if I enter a trade at $100, set my stop-loss at $95, and my target at $115, the RRR is:

(115 – 100) / (100 – 95) = 15 / 5 = 3:1

This means I stand to gain $3 for every $1 I risk.

To assess trades quantitatively, I use tools and indicators such as:

• Support and Resistance Levels to determine realistic stop-loss and target areas.

• Fibonacci Retracement to identify potential reversal zones for entry and exits.

• Moving Averages (EMA/SMA) to evaluate trend direction and strength.

• Relative Strength Index (RSI) and MACD to confirm entry timing and momentum.

Using the risk-reward ratio has helped me become far more disciplined in my trading decisions. Rather than chasing trades emotionally, I focus on setups that offer at least a 2:1 reward-to-risk ratio. This mindset shift has improved my win rate and overall profitability. Even if I lose 50% of the time, a strong RRR ensures my winners outweigh my losers, keeping my strategy profitable over time.

By combining RRR analysis with solid technical indicators, I’ve developed a systematic approach to trading that minimizes losses and maximizes gains.