The ratio comparing the potential loss to the potential gain of a trade. A 1:3 ratio means risking one unit to potentially gain three units. A key metric in trade planning.
Risk-Reward Ratio
Related Terms
Stop Loss
An order that automatically closes a position at a predetermined price to limit potential losses. A …
Take Profit
An order that automatically closes a position at a predetermined profit target. Ensures gains are lo…
Win Rate
The percentage of trades that close with a profit out of total trades executed. While important, it …
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