Risk-reward ratio is a key concept in forex trading that refers to the potential profit versus the potential loss of a trade. It represents the ratio between the amount of money a trader is willing to risk (i.e., the stop loss) and the potential reward (i.e., the take profit). A favorable risk-reward ratio is typically considered to be at least 1:2, meaning that the potential reward is at least twice the potential risk. By maintaining a favorable risk-reward ratio, traders can improve their overall profitability over time, even if they experience a relatively high number of losing trades.
