📊 What is Risk-to-Reward Ratio?

It’s the ratio between:

How much you're willing to lose (risk)

How much you're aiming to gain (reward)

on a single trade.

Example:

You risk $100 to potentially make $300

→ R:R = 1:3

🎯 Why is it Important?

Because even with a lower win rate, good R:R management can make you consistently profitable.

Example:

Win rate: 40%

Risk-to-Reward: 1:3

Out of 10 trades:

4 wins × $300 = $1,200

6 losses × $100 = -$600

Net profit = +$600

👉 See? You win less than half, but still profit because your gains outsize your losses.

🛠️ How to Use It in Trading

Step What to Do

Identify Entry Based on your strategy (support bounce, breakout, etc.)

Set Stop Loss Define a clear invalidation point (how much you're willing to lose)

Set Target Choose realistic price levels for taking profit

Calculate R:R (Potential Profit) ÷ (Potential Loss)

Only take trades If R:R meets or exceeds your rule (like 1:2 or 1:3)

📈 Example: ETH Trade Setup

Entry: $1,600

Stop Loss: $1,550 (risk: $50)

Take Profit: $1,700 (reward: $100)

R:R = $100 / $50 = 2:1

✔️ Good trade — take it.

🔒 Pro Tips:

Aim for minimum 1:2 R:R

Be disciplined — never move your stop loss further out of fear

Only increase size after proven consistency

Don't chase trades if you missed the ideal setup

📊 Risk Management Rule of Thumb:

Risk 1–2% of your account per trade

Example:

If your account is $5,000, risk $50–100 max per trade

#RiskToReward