#RiskRewardRatio The Risk-Reward Ratio (RRR) is a key concept in investing and trading that compares the potential loss (risk) to the potential gain (reward) of a trade or investment.

Formula:

Risk-Reward Ratio = Potential Loss / Potential Gain

Example:

If you're risking $100 to potentially make $300, the RRR is:

RRR = 100 / 300 = 1:3

This means for every $1 you risk, you aim to gain $3.

Why it matters:

A lower RRR (like 1:3 or 1:4) is more favorable—it means you're risking less to gain more.

Professional traders often aim for RRRs of 1:2 or better, depending on their strategy and win rate.

Want help calculating RRR for a specific trade or want to see how it fits into a trading plan?