risk-reward ratio
/rɪsk rɪˈwɔːrd ˈreɪʃioʊ/
the expected profit of a trade compared to its potential loss, used to evaluate trade quality
risk-reward ratio in a sentence
“A risk-reward ratio of 1:3 means risking $100 to potentially make $300.”
Origin of risk-reward ratio
Risk from Italian risco danger + reward from Old French rewarder to look at
Related Words
stop-loss order
an order to sell a security automatically when it reaches a specified price, limiting downside loss
limit order
an order to buy or sell a security only at a specified price or better
dollar-cost averaging
investing a fixed dollar amount at regular intervals regardless of price, reducing the impact of volatility
rebalancing
adjusting a portfolio back to its target asset allocation by buying and selling assets
alpha
excess return on an investment relative to the return of a benchmark index
beta
a measure of how much a security moves relative to the broader market; a beta above 1 means more volatile