Risk-Reward Ratio
The potential loss compared with the potential gain on a trade, used to judge whether it's worth taking.
Related terms
Related lessons
Stop Losses
The pre-decided exit that defines your risk before a trade goes wrong. The types of stop (hard, mental, trailing, guaranteed), how to place them by structure or volatility rather than by hope, why gaps mean a stop is not a guarantee, and the discipline of honouring them.
Position Sizing
The most important and most ignored decision in trading: how much to commit to a position. The percent-risk rule, the position-size formula that turns a stop into a share count, volatility-based sizing, and why how much you risk matters far more than what you buy.
Risk/Reward & R-Multiples
The framework that ties wins, losses and probability into a single judgement of whether a strategy makes money. The risk/reward ratio, thinking in R-multiples, the expectancy formula, and why a strategy that loses more often than it wins can still be highly profitable.
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