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Risk-Reward Ratio

Risk Management

The ratio of potential loss to potential gain on a trade. A 1:3 ratio means risking $1 to potentially make $3. Swing traders typically target 1:2 or better to remain profitable with modest win rates.

Related Terms

R-Multiple

A trade result expressed as a multiple of the initial risk (R).

Position Sizing

Determining how many shares or contracts to trade based on account size and risk per trade.

Stop-Loss

An order to exit a position when the price moves against you to a predetermined level.

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Risk-Reward Ratios

Level 4: Risk & Money Management · 18 min