#RiskRewardRatio

The Risk-Reward Ratio is a key concept in investing and trading that compares the potential profit of a trade to its potential loss. It is calculated by dividing the amount of risk (the difference between the entry point and the stop-loss) by the expected reward (the difference between the entry point and the target price). For example, a ratio of 1:3 means you risk $1 to potentially gain $3. Traders use this ratio to evaluate whether a trade is worth taking. A good risk-reward ratio helps manage losses and improve profitability over time, making it essential for smart decision-making.