Today I want to talk about the ratio of risk reward in forex trading. You've probably heard about the ratio of risk reward ratio, but are risk reward it?
The ratio of risk reward ratio is used by many investor/trader to compare yieldsexpected from an investment to the amount of risk taken to obtain the yield. This ratiois calculated by dividing mathematically large potential losses traders if prices move toward the unexpected before (in other words: risk) with great potential for profit are expected to be accepted to the trader when the position is closed (in other words: reward) (according to investopedia).
Risk Reward Ratio
So, let me explain more about the ratio of risk reward. Let's say you want to trade the EURUSD pair. You are using 0.1 lot with 30 pips stop loss and profit target of 60 pips.Your risk ratio (of stop loss) and reward (profit target) is 1:2 (00:60), where You trade with a number of doubled your risk. The ratio of risk reward will vary for each trader.Based on trading strategies and market situation, the ratio of risk reward every tradingnot always the same.
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