One of the key habits of successful crypto traders is evaluating the risk-reward ratio before entering any trade. This straightforward calculation helps you assess whether a trade is worth pursuing by comparing the potential profit to the possible loss.
To figure it out, simply divide your expected profit by the amount you're prepared to risk. For instance, if you're aiming for a $300 profit with a $100 stop-loss, your risk-reward ratio would be 3:1 — meaning the reward is three times the risk.
Here are three helpful tools to support your analysis:
• Fibonacci Retracement – Identifies crucial support and resistance zones, helping you place more accurate targets and stop-losses.
• ATR (Average True Range) – Gauges market volatility, allowing you to adjust your stop-loss based on current conditions.
• TradingView Risk-Reward Tool – A visual tool that lets you plot your target, stop-loss, and risk-reward ratio directly on the chart.