#RiskRewardRatio is a key concept in trading and investing that measures the potential profit of a trade relative to its possible loss. It's calculated by dividing the amount a trader stands to lose (risk) by the expected gain (reward). For example, a 1:3 risk-reward ratio means risking $1 to potentially earn $3. A favorable ratio helps traders manage risk effectively and maintain profitability, even if only a portion of trades are successful. By consistently seeking high reward-to-risk setups, traders can improve long-term outcomes. Mastering this ratio encourages disciplined decision-making and helps prevent emotional, impulsive trades that could harm performance.