#RiskRewardRatio The risk-reward ratio is a key metric in trading and investing, measuring potential profit against potential loss. Calculated by dividing the expected reward (profit) by the risk (potential loss), it helps assess whether a trade is worth taking. For example, a 1:3 ratio means risking $1 to potentially gain $3. A higher ratio indicates a more favorable trade, but it’s not a guarantee of success. Traders use it to align strategies with their risk tolerance, ensuring disciplined decision-making. Effective use requires considering probabilities, market conditions, and personal goals to optimize outcomes while managing uncertainty.