Risk-Reward Ratio

Risk-Reward Ratio - The ratio of potential profit (reward) to potential loss (risk) on a trade. For example, a 1:3 risk-reward means risking 1 unit to gain 3. Traders and robots use target:stop levels reflecting a desired ratio (e.g. setting take-profit at 3x the stop distance). Maintaining favorable risk-reward is key to profitable strategies, even with moderate win rates.