#RiskRewardRatio

The risk-reward ratio is a key concept in investing and trading, helping you evaluate the potential return of an investment compared to its possible loss. It's calculated by dividing the amount you expect to gain by the amount you could lose. For example, a 3:1 ratio means you aim to make $300 for every $100 risked. A favorable risk-reward ratio helps you make smarter, more disciplined decisions and manage risk effectively. Successful traders often look for setups with high reward potential and limited downside. Understanding and applying this ratio is crucial for long-term profitability and maintaining a strong trading strategy.