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Understanding Risk/Reward Ratios

📊 What is Risk/Reward?

The risk/reward ratio compares your potential profit to your potential loss on a trade. A 1:2 ratio means you're risking $1 to potentially make $2. This helps ensure profitable trading over time.

🎯 Ideal R:R Ratios

Most successful traders aim for at least 1:2 risk/reward. This means even with a 40% win rate, you can be profitable. Higher ratios like 1:3 or 1:4 allow for even lower win rates while staying profitable.

💡 Using R:R in Trading

Before entering any trade, calculate your R:R ratio. If it's below 1:1.5, consider skipping the trade. Always set your stop loss and target before entering to maintain discipline.