#RiskRewardRatio

Understanding the risk-reward ratio is crucial for successful trading. It helps traders evaluate whether a trade is worth taking based on the potential profit compared to the possible loss. For instance, if you risk $100 to potentially earn $300, the risk-reward ratio is 1:3. A higher ratio indicates a better return potential for the amount of risk you're taking. Smart traders always aim for favorable ratios to maintain consistent profitability over time. Never enter a trade without calculating this ratio—it can be the difference between long-term gains and unnecessary losses.