#RiskRewardRatio The Risk-Reward Ratio (RRR) is a metric used by traders and investors to assess the potential profit of a trade relative to its potential loss. It’s calculated as:

Risk-Reward Ratio = Potential Loss / Potential Gain

Example:

Let’s say you:

Buy a stock at $100

Set a stop-loss at $95 (risking $5)

Set a take-profit at $110 (aiming to gain $10)

RRR = $5 (risk) / $10 (reward) = 1:2

This means you’re risking $1 to potentially make $2.

Key Points:

Lower RRRs (e.g., 1:3) are better — you’re risking less to gain more.

A good trading strategy usually aims for RRRs of 1:2 or higher.

Combined with a decent win rate, this helps maintain profitability over time.