#RiskRewardRatio The Risk-Reward Ratio is a financial metric used to evaluate the potential profit of an investment compared to its possible loss. It’s calculated by dividing the expected loss (risk) by the expected gain (reward). For example, a 1:3 ratio means risking $1 to potentially gain $3. Investors use this ratio to determine whether a trade is worth taking. A higher reward compared to the risk is typically more attractive. However, even trades with favorable ratios can fail, so it’s crucial to combine this metric with proper analysis and risk management strategies to make informed investment decisions.