#RiskRewardRatio The Risk-Reward Ratio (RRR) is one of the most important tools in trading — it tells you if a trade is worth taking.

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What is Risk-Reward Ratio?

It compares how much you're risking (potential loss) to how much you could gain (potential reward).

Formula:

> Risk-Reward Ratio = Potential Loss / Potential Gain

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Example Trade Setup

Entry: $60,000

Stop-loss: $58,500 → Risk = $1,500

Target: $63,000 → Reward = $3,000

> RRR = $1,500 / $3,000 = 1:2

This means you’re risking $1 to potentially make $2 — which is a solid trade setup.

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What’s a Good RRR?

Minimum acceptable: 1:2 (risk $1 to make $2)

Great setups: 1:3 and beyond

Scalping: Might go as low as 1:1 if high win rate

Swing/Position trading: Look for 1:2 or better

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Why It Matters

Even if you're right only 50% of the time, with a 1:2 RRR, you’ll still be profitable in the long run.