Risk-reward ratio

The planned gain on a trade relative to its planned loss.

In plain English

A ratio only means something alongside a win rate. A high ratio with a low hit rate and a low ratio with a high hit rate can both lose money.

Example

Entry 100, stop 95, target 110: risking 5 to make 10 is a 1:2 risk-reward ratio.

Risk Management

See also

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