Risk Reward Ratio (R:R)
The mathematical ratio comparing the potential profit of a trade setup to its potential downside risk.
In-Depth Explanation
Enforcing positive R:R ratios (e.g. 1:2 or 1:3) enables long-term profitability even when win rates are below 50%.
Practical Market Example
Real-World Application
Targeting a $300 profit with a $100 stop loss represents a 1:3 Risk-to-Reward ratio.