The risk-reward ratio measures how much your potential reward is, for every dollar you risk. For example: If you have a risk-reward ratio of 1:3, it means you're risking $1 to potentially make $3. If you have a risk-reward ratio of 1:5, it means you're risking $1 to potentially make $5.There is no best ratio as the choice is personal but in general 1:2 is a commonly used ratio. The issue is how much money is the trader willing to risk? A 1:2 Risk/Reward ratio maximizes profits on winning trades, while limiting losses when a trade moves against.
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