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📖 Trading term

What Is Risk-Reward Ratio? Meaning & Example

Definition

The risk-reward ratio compares how much you could lose on a trade with how much you could gain. Many traders look for setups where potential reward is at least twice the risk.

Example: Risking $100 to a stop-loss for a potential $300 gain gives a 1-to-3 risk-reward ratio.

Related terms

What is Risk-Reward Ratio?

The risk-reward ratio compares how much you could lose on a trade with how much you could gain. Many traders look for setups where potential reward is at least twice the risk.

Can you give an example of Risk-Reward Ratio?

Risking $100 to a stop-loss for a potential $300 gain gives a 1-to-3 risk-reward ratio.

Educational only – not financial advice. This page explains ideas and reports the news. It is not a recommendation to buy, sell or hold anything. Markets go up and down and you can lose money. Do your own research and consider talking to a licensed adviser.

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