Risk-Reward Ratio
How much you risk on a trade compared with the potential gain.
What is Risk-Reward Ratio?
The risk-reward ratio compares the amount a trader stands to lose if a trade goes wrong with the amount they stand to gain if it goes right. It is found by dividing the distance from entry to stop-loss by the distance from entry to profit target. A ratio like 1:3 means risking one unit to potentially make three, and it helps traders judge whether a setup is worth taking.