#TradingPsychology

Do you enter a trade knowing how much you will lose if you lose? And how much you will gain if you win?

If not… then you are trading blindly!

The Risk/Reward Ratio is one of the most important secrets of professional trading and investing.

It is simply: "How much are you willing to lose, versus how much do you expect to gain?"

Example:

• You enter a trade with a risk of $10

• You expect to gain $30 from it

• The ratio = 1:3 (Risk 1 for a Reward of 3)

Why is it important?

• Even if you lose multiple times, you can still end up profitable in the end

• It helps you choose the right trades, not just any opportunity that comes along

• It helps you build a realistic and studied trading plan

The best traders look for ratios of 1:2 or 1:3 and higher.

This means that even if only 40% of their trades succeed, they remain profitable!

In summary:

Before you enter any trade, ask yourself:

"Is the risk worth it? Or is it just impulsiveness?"

Calculate it correctly… and trade with your mind, not your emotions.