#RiskRewardRatio The Risk-Reward Ratio is a fundamental metric in trading and investing that compares the potential profit of a trade to its potential loss. It's calculated by dividing the amount you risk (the difference between your entry point and stop-loss) by the potential profit (the difference between your entry point and target price). A lower ratio is generally preferred, indicating a higher potential reward for the risk taken. It helps investors assess if the potential gains justify the risks involved in a particular trade or investment.