#RiskRewardRation
The risk-reward ratio is a fundamental concept in trading and investing. It compares the potential profit (reward) of a trade to the possible loss (risk). Simply put, it’s calculated by dividing what you could lose by what you aim to gain.
For example, a 1:3 ratio means you risk $1 to potentially make $3.
Focusing on trades with favorable risk-reward ratios allows traders to manage risk more effectively and grow their portfolios over time—even if not every trade wins.
A strong ratio isn’t just smart—it’s essential for long-term success and discipline in the markets.