#RiskRewardRatio The Risk-Reward Ratio is a measure used to evaluate the potential profit and loss of a trade or investment. It compares the amount of risk (potential loss) to the amount of potential reward (profit).

Calculation

Risk-Reward Ratio = Potential Loss / Potential Gain

Example

If you buy a stock with a potential gain of $100 and a potential loss of $50, the Risk-Reward Ratio would be 1:2 (50/100).

Importance

The Risk-Reward Ratio helps investors:

1. Evaluate trade-offs between risk and potential returns

2. Set realistic expectations

3. Make informed decisions

Common Ratios

1:1, 1:2, 1:3 are common Risk-Reward Ratios, with 1:2 often considered a good balance between risk and reward.$SOL $XRP $BNB