#note

Risk/Reward Ratio — the foundation of a sound strategy 🎯

One of the key tools of a successful trader is the risk-to-reward ratio (Risk/Reward Ratio). This is a metric that helps make informed decisions in each trade.

What is the Risk/Reward Ratio?

This indicator shows how much a trader is willing to lose for a potential profit. For example, if in a trade you risk $10 to earn $30, then the R/R is 1:3.

How to calculate it?

(Entry Price – Stop-Loss) / (Target Price – Entry Price)

For example, you buy an asset at $100, set a stop-loss at $95 and a take-profit at $115.

Risk: $5

Profit: $15

R/R = 1:3

Why is it important?

Consistent use of R/R ≥ 1:2 even with 40% successful trades allows you to be profitable. It provides flexibility and protects against emotional trading.

💬 Many beginners make the mistake of closing profitable trades too early and holding onto losing ones — violating the logical structure of R/R. The risk-to-reward ratio helps to counteract this.

Even if you don't have perfect market analysis, a strict approach to the Risk/Reward Ratio can significantly increase the chances of long-term success.

#RiskRewardRatio #TradingEducation #RiskManagement #SmartTrading