๐ A series of conversations about trading:
๐ Lesson: 62 โ Risk/Reward
๐ผ Angel: What does risk/reward mean?
๐ฆ Falcon: It compares the potential profit from a trade with the potential loss, to determine whether the opportunity is worth risking capital on.
๐ผ Angel: How do we calculate the risk/reward ratio?
๐ฆ Falcon: We divide the expected profit by the potential loss. If we risk $10 to make $30, the ratio is 1:3, meaning the potential reward is three times the risk.
๐ผ Angel: Does a high ratio mean the trade is guaranteed to succeed?
๐ฆ Falcon: No, but it helps us choose trades with a suitable potential reward relative to the risk, while also considering the probability that the strategy will succeed.
โ Takeaway:
๐ฅ Donโt just look for a trade that will make you a lot of money; look for one thatโs worth the risk. Managing losses is an essential part of making profits.
โ Dedication:
๐ฆ ๐ To my angel, who taught me that success isnโt about how much we earn, but about balancing what we aspire to with what weโre willing to risk.
ููุฅุทูุงุน ุนูู ุจุงูู ุงูู ูุงุถูุน ูุฑุฌู ุงูุฏุฎูู ู ู ููุง
$ONE
๐ Lesson: 62 โ Risk/Reward
๐ผ Angel: What does risk/reward mean?
๐ฆ Falcon: It compares the potential profit from a trade with the potential loss, to determine whether the opportunity is worth risking capital on.
๐ผ Angel: How do we calculate the risk/reward ratio?
๐ฆ Falcon: We divide the expected profit by the potential loss. If we risk $10 to make $30, the ratio is 1:3, meaning the potential reward is three times the risk.
๐ผ Angel: Does a high ratio mean the trade is guaranteed to succeed?
๐ฆ Falcon: No, but it helps us choose trades with a suitable potential reward relative to the risk, while also considering the probability that the strategy will succeed.
โ Takeaway:
๐ฅ Donโt just look for a trade that will make you a lot of money; look for one thatโs worth the risk. Managing losses is an essential part of making profits.
โ Dedication:
๐ฆ ๐ To my angel, who taught me that success isnโt about how much we earn, but about balancing what we aspire to with what weโre willing to risk.
ููุฅุทูุงุน ุนูู ุจุงูู ุงูู ูุงุถูุน ูุฑุฌู ุงูุฏุฎูู ู ู ููุง
$ONE