#RiskRewardRatio

The risk-reward ratio (RRR) is a metric used in trading and investing to compare the potential profit of a trade or investment to its potential loss.

Formula:

Risk-Reward Ratio=Potential Loss (Risk)/Potential Profit (Reward)

Example:

If you're risking $100 to potentially gain $300, the RRR is:

100/300=1:3

This means for every $1 risked, you aim to make $3.

Interpretation:

1:1 = Equal risk and reward

1:2 or better = Favorable, as the reward is at least twice the risk

Higher ratios (e.g., 1:3, 1:4) = More potential reward per unit of riskte to assess long-term profitability.

Traders often use RRR along with win rate to assess long-term profitability.