Risk Reward
The ratio of the expected profit to the potential loss on a trade is often expressed as a ratio, such as 1:2. This means that the potential profit of the trade is twice the potential loss. For example, if a trader enters a trade with a stop loss of 50 pips and a take profit of 150 pips, the risk reward ratio would be 1:3 (150 / 50)
Traders use risk reward ratios to make informed trading decisions and implement sound risk management strategies. A positive risk reward ratio can allow traders to achieve consistent profits even if they have a relatively low win rate, as long as they can keep their losses small and their profits large.