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7.1 How to use and calculate risk/reward ratio for trading

there are various traders who generate more wins than losses but still in finding themselves in a shedding place for the given period of time. this is a classic example of cash administration long gone flawed. In different phrases, they don’t calculate and follow the suitable possibility/reward ratio to their trading methods. normally phrases, a 1:2 risk reward ratio must be used which merely implies that your potential reward is two times greater than your chance. that is the appropriate solution to change. skilled merchants do recommend a 1:three ratio for obvious reasons however it’s up to you and your trading fashion which ratio you should utilize.

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