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Understanding Risk-Reward in Trading
A quick word on risk-reward: it's not about being right every time, it's about making sure your winners are bigger than your losers. If you're risking $1 to make $2, that's a 1:2 ratio. Means you can be wrong more often than right and still be profitable. For instance, if you're looking at $ADBE at 260.24, and your stop is at 255 with a target at 270, you're risking $5 to make $9.76. That's a decent setup.
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While the math on risk-reward ratios is simple, consistently executing on those ratios is a different story. Getting stopped out frequently on small losses before hitting a larger target is a common issue that often gets overlooked in these discussions.