Understanding Risk-Reward Ratios

A critical aspect of any trade is the risk-reward ratio, which quantifies how much you stand to gain versus how much you stand to lose. For instance, if you set a stop-loss at 122.25 on $KES and a take-profit at 123.50 from a current price of 122.55, your risk is 0.30 units while your reward is 0.95 units, giving you a favorable 1:3.16 risk-reward.