Risk to reward ratio denotes the potential profit in comparison to the amount you may lose for any given trade. For example, when you risk 100 USD on position to potentially gain 300 USD, the risk to reward ratio is 1:3.
Ratio of 1:2 is considered the minimum one should aim for as only a third of positions would need to be profitable to remain break even.
Potential profit and loss can be defined through Stop Loss and Take Profit levels.
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