REWARD-RISK RATIO

Reward-risk ration is a nifty little tool that can potentially do a great good in the span of one trade. Reward0risk ration is a ration that can determine whether the risk that is put into a certain trade is going to be worth it and whether the winning return are going to be big enough in order to justify the risks taken.

It can be counted by dividing the amount the individual stands to lose if the price of an asset jumps in the unexpected direction (the risk) by the amount of profit the trader expects to make (the reward).

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