Forex glossary

Risk-reward ratio in Forex

A clear definition of Risk-reward ratio, with practical context for reading markets and making better trading decisions.

Level 6 · Manage Risk and ReactionsRisk management

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.

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