Understanding the risk-reward ratio is like reading the nutritional label before eating a mystery burrito - it might save you from regret later.
In trading, this ratio helps determine if a trade is worth taking. A common standard is 1:2 or 1:3, meaning the potential reward is 2–3 times greater than the risk. It's a simple concept, yet often ignored when emotions take over.
Traders who stick to solid risk-reward setups tend to survive longer in volatile markets. It’s not about winning every trade - it’s about making sure your wins outweigh your losses when the dust settles.
Good strategy beats lucky timing any day.