Risk
What is Risk-Reward Ratio?
Risk-reward ratio compares the potential loss to the potential gain of a trade or investment, helping you assess whether the potential upside justifies the downside.
Formula
Risk/Reward = Potential Loss (Entry - Stop Loss) ÷ Potential Gain (Target - Entry)
How to Interpret
A ratio of 1:3 means you risk $1 (or ₹1 in international markets like India) to potentially gain $3. Professional traders typically seek at least 1:2 risk-reward.
Typical Ranges
At least 1:2 for swing trades, 1:3 for position trades.