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What is the risk/reward ratio in cryptocurrency trading, and how to use it

May 8, 2023


The risk/reward ratio or risk/return ratio is a commonly used metric in trading that compares the potential profit of a trade with the potential loss. That said, it’s the reward traders stand to make for the risk they take.

For example, an investment with a risk/reward ratio of 1:3 would mean that for every dollar the investor spends, they gain three dollars if the trading goes in their favor. The risk/reward ratio is decisive to cryptocurrency trading, whether for daily trades or crypto investment for the long run, known as “hodling.”