Risk-reward ratio in Forex
A clear definition of Risk-reward ratio, with practical context for reading markets and making better trading decisions.
Definition
The planned loss compared with planned potential reward. It helps judge whether a setup is worth taking, but it says nothing about how often the setup wins.
Practical forex example
Risking 10 pips to target 20 pips is a 1:2 risk-reward ratio.
Why Risk-reward ratio matters
Understanding Risk-reward ratio helps traders interpret market information, plan decisions, and manage risk with more context.
Related forex terms
Continue learning
Turn the definition into trading skill.
Explore structured lessons and practical tools when you are ready to go further.