#RiskRewardRatio Great question. In crypto (and investing in general), the Risk-Reward Ratio (RRR) helps you measure how much risk you're taking for the potential reward. It's super useful for deciding if a trade is worth it.
Formula:
\text{Risk-Reward Ratio} = \frac{\text{Potential Loss}}{\text{Potential Gain}}
Example in Crypto:
Say you’re buying Bitcoin at $60,000.
Stop-loss (your risk): $55,000 → You risk losing $5,000.
Target profit: $70,000 → You aim to gain $10,000.
RRR = \frac{5,000}{10,000} = 1:2
This means you're risking 1 to potentially make 2. That's generally a good setup.
What’s a Good Ratio?
1:2 or higher is ideal (risking 1 to make 2+).
Some aggressive traders go for 1:1.5, but below that you need a very high win rate to stay profitable.
Why It Matters in Crypto
Crypto is volatile, so managing risk is crucial. Even with 50% win rate, you can still make money if your winners are bigger than your losers.
Want a risk-reward calculator or to break it down for a trade you’re planning?