What is a risk-reward ratio in Forex Trading?
The concept of risk to reward ratio is what will make you a winner in the long term. Before entering into any trade, you need to know its amount The of money you would make if the market went in your favor, and how much money you will lose if the market moves against you.
Never enter into a trade where the profit is less than the amount From the money I risked.
If you were to risk $ 100, for example, your profit target should be at least
$ 200, that’s a 1: 2 risk to reward ratio.
Suppose you place 10 trades with a 1: 2 risk to reward ratio
Each trade you risk $ 100.
You won 5 trades and lost 5 trades. So you lose $ 500 but You win $ 1000, so the benefits are $ 500.
That’s the power of the risk-reward ratio, you shouldn’t think you have to win all of your trades to become a successful trader. If you can take the advantage of the risk to reward ratio, you will always be
profitable.
