DailyFX: "What exactly is a Risk/Reward ratio and how does it apply to Forex trading? First, a Risk/Reward ratio refers to the amount of profit we expect to gain on a position, relative to what we are risking in the event of a loss. Knowing this ratio can help traders manage risk by setting expectations for the outcome of a trade prior to entry. The key here is to find a positive ratio for your strategy. This way we increase the margin of profit when we are right, relative to the amount we lose if were wrong."
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