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Risk ManagementR
Risk-Reward Ratio
The ratio between the potential risk and potential reward of a trade. A 1:3 risk-reward ratio means you risk $1 to potentially make $3.
Example
“A trader sets a stop-loss at $95 and a take-profit at $115 on a stock bought at $100, creating a 1:3 risk-reward ratio with $5 at risk for a potential $15 gain.”