Mark William_ Baker

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What is risk-to-reward ratio in forex?

The risk-to-reward ratio compares the potential loss of a trade to its potential profit. For example, risking 50 pips to gain 150 pips results in a 1:3 ratio. Professional traders aim for ratios of at least 1:2 or 1:3 to ensure long-term profitability, even if their win rate is below 50%. A poor ratio, such as risking more than you can earn, leads to consistent losses over time. Using stop-loss and take-profit levels based on this ratio ensures disciplined trading. Combining proper ratios with consistent strategies helps traders manage risk effectively and improve overall performance.