#RiskRewardRatio The risk-reward ratio is a fundamental tool for traders on Binance, helping evaluate potential profits against potential losses. It's calculated by dividing the potential loss by the potential profit. For instance, risking $100 to potentially gain $300 yields a 1:3 ratio, considered favorable as the potential reward is three times the risk.

A lower ratio (e.g., 1:2, 1:3) is generally preferred, indicating a higher potential profit relative to the risk. Conversely, a higher ratio (e.g., 2:1) suggests the risk outweighs the potential reward. Traders use this ratio to set stop-loss and take-profit orders, manage capital, and improve their long-term profitability on the Binance platform.