Day 20 is dedicated to the most crucial aspect of trading: Risk Management. No matter how good your strategy is, you cannot profit consistently in the long run without mastering the Risk/Reward (R/R) Ratio.

​The R/R Ratio measures the relationship between the money you risk and the profit you aim to make on a single trade.

​📐 Calculating the Risk/Reward (R/R) Ratio

​There are three main steps to calculate your R/R Ratio:

​Step 1: Define Your Risk (R)

  • ​Risk (R) = Entry Price - Stop-Loss Price

  • ​Example: If you buy at $15.00 and place your Stop-Loss at $14.50, your Risk (R) is $0.50.

​Step 2: Define Your Reward (R)

  • ​Reward (R) = Take Profit Price - Entry Price

  • ​Example: If you buy at $15.00 and place your Take Profit at $17.00, your Reward (R) is $2.00.

​Step 3: Calculate the R/R Ratio

  • ​R/R Ratio = Reward / Risk

  • ​Calculation: $2.00 / $0.50 = 4.0

  • ​Meaning: This trade is 1:4. This means you are aiming to make $4 for every $1 you risk.

    ​The Golden Rule: You should only enter trades with an R/R Ratio of 1:2 or higher. A lower R/R ratio means your probability of winning must be unrealistically high to make money.

    ​💡 Calculating Trade Size Using R/

    ​Professional traders follow the 1% to 2% Rule, risking only 1% to 2% of their total portfolio capital per trade. (E.g., If your portfolio is $10,000, you only risk $100 or $200).

    1. ​Capital Risk (Dollar Amount): 1% of $10,000 = $100

    2. ​Price Risk: $0.50 (From Step 1)

    3. ​Trade Size (Number of Coins to Buy): Capital Risk / Price Risk

      • ​Calculation: $100 / $0.50 = 200 Coins

      • ​Result: If your Stop-Loss hits, you lose exactly $100. If your Take Profit hits, you gain $2.00 x 200 = $400, achieving that 1:4 ratio.

      ​Critical Tip: Your Stop-Loss is the key determinant of your R/R Ratio. Ensure it is placed at a technically sound location (e.g., just below a major Support Level) and not just based on where you want to risk $100.

      ​Question: What is the minimum acceptable R/R Ratio you allow yourself to trade with (e.g., 1:2, 1:3, 1:4), and why? Share your risk discipline in the comments!

      #RiskManagement #RiskReward #TradeSize #CryptoEducation💡🚀

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