Risk/reward ratio
TradingThe relation between the loss if the stop is hit and the gain if the target is hit.
Example
Risk $100 to make $300 = 1:3.
Common misconceptions
- That a good ratio alone makes a strategy profitable (win rate matters equally)
The relation between the loss if the stop is hit and the gain if the target is hit.
Risk $100 to make $300 = 1:3.