🔍 What Is a 1:2 Risk-to-Reward Ratio in Trading?

The 1:2 risk-to-reward ratio is a popular strategy where a trader risks $1 to potentially gain $2. It's designed to keep losses smaller than potential profits, even if only half the trades are successful.

Example:

Risk (Stop-Loss): $100

Reward (Take-Profit): $200

Ratio = 1:2

Why Use It?

✅ You only need to win 33% of trades to break even

✅ Helps manage emotions and protects capital

✅ Encourages disciplined, consistent trading

Traders use this ratio to build long-term profitability and reduce emotional decision-making. Combined with proper analysis and risk management, the 1:2 ratio is a simple but powerful tool for smarter trading.

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