What is Risk-Reward Ratio – The Golden Rule of Smart Trading

One major reason traders fail is not strategy – but poor risk-reward management. You may win 7 out of 10 trades, but if your losses are bigger than your profits, you're still losing money. 🔹 Risk-Reward Ratio = How much you're willing to lose vs expected gain 🔹 Ideal ratio = 1:2 or higher (Example: If risking ₹1000, potential reward should be at least ₹2000) ✅ Every professional trader defines Stop Loss (SL) and Target (TGT) before entering a trade ✅ Never take a trade with RR below 1:1.5 – even if setup looks good ✅ Avoid revenge trading – it ruins RR discipline 📌 Example: Entry: ₹400 SL: ₹380 TGT: ₹440 RR = 1:2 → That’s a good trade But if your SL is ₹390 and TGT is ₹410, RR = 1:1 → Not worth it unless win rate is very high 🧠 Stick to your RR strategy long term — it’s the foundation of profitable trading.