Technical Definition
Risk-Reward Ratio (R:R)
The risk-reward ratio compares potential loss to potential profit in a trade.
By Crypto University Editorial
Stop LossTake Profit
✦ Key Insight
It determines whether a trade is worth taking over the long term.
✕ Common Misconceptions
Ignoring R:R
Taking trades with poor reward potential
Overtrading without edge
Detailed Explanation
How It Works
Risk = distance to stop loss
Reward = distance to take profit
Ideal ratio ≥ 1:2
FAQs
Q: Is higher R:R always better?
Yes, but probability of success matters too.
In Practice
“Risk $100 to make $300 → 1:3 R:R”