Understanding the risk-reward ratio is crucial for smart trading and investing. It compares the potential profit of a trade to the possible loss, helping traders assess whether a trade is worth taking. A common rule of thumb is aiming for a 1:2 ratio, meaning the potential reward is twice the risk. This simple concept helps traders stay disciplined, manage losses, and focus on high-probability setups. A good risk-reward ratio doesn't guarantee success, but it significantly improves long-term profitability when combined with proper strategy and risk management. Always trade with the odds in your favor. #RiskRewardRatio #TradingStrategy #InvestingTips #SmartTrading #ProfitPlanning