Risk to Reward Ratio Strategy

One way to increase the profit opportunity is performing a transaction when the potential benefits outweigh the risks. For example, the potential returns three times greater than the risk. Thus the ratio is 3: 1.


See the following table as an example:



In this example, we can see that even though only half of our transactions makes a profit, but we still get a total profit of $ 10,000. Remember that if we are dealing with “risk to reward ratio,” which is good, our opportunity to book profits will be greater.