Definition
The ratio between potential loss and potential profit on a trade.
Understanding Risk Reward Ratio
Risk Reward Ratio is an important concept in stock market trading. Understanding this term will help you make better trading decisions and communicate effectively with other traders and financial professionals.
Key Points
- Basic Definition: The ratio between potential loss and potential profit on a trade.
- Category: This term is commonly used in Risk Management
- Relevance: Essential knowledge for traders operating in Indian stock markets
Practical Example
When trading on NSE or BSE, you'll encounter risk reward ratio regularly. For example, understanding this concept helps you analyze market conditions, make informed decisions, and manage your trading positions effectively.
Related Concepts
To fully understand risk reward ratio, you should also be familiar with related trading concepts. Check out the related terms in the sidebar for a comprehensive understanding of this topic.