What is Risk-to-Reward Ratio (R:R)?

A measure used by traders to compare the potential profit of a trade to its potential loss.

In-Depth Explanation

For example, if you risk £100 to make £300, your R:R is 1:3. Professionals aim for a positive R:R to ensure they can remain profitable even with a win rate below 50%.

Practical Example

"The trade has a 1:2 risk-to-reward ratio, which meets the trader's minimum requirements."

Related Terms

Risk Management Stop Loss Take Profit

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