Understanding the risk-reward ratio is key to becoming a successful trader. It helps you evaluate whether a trade is worth taking based on how much you’re willing to risk compared to the potential profit. For example, a 1:3 risk-reward ratio means you’re risking $100 to potentially gain $300. This ratio keeps your losses small and wins larger in the long run. Even with a 40% win rate, you can be profitable if your reward outweighs your risk consistently. Many traders ignore this and let emotions take control. Always plan your trades and never risk more than you can afford to lose. Master the math, master the market.
