Risk-Reward

Is a calculated ratio you look at as an investor to see how much reward you can get in relation to the risk you may take for a trade. It is then up to you as an investor to calculate and analyze how much return the investment can provide in relation to the risk to the downside the relevant position exposes you to.

As a rule, securing mechanisms such as Stop-Loss are used to obtain a "guaranteed" maximum downside, but there are also other ways to secure the maximum downside. Strategies around this can be found under the tabs for risk management.

It can be very beneficial to make good decisions about the relationship between risk and reward. Traders use these calculations to maintain continuous returns over time with minimal downside risk. With a calculated downside and calculated upside potential, you can make more rational choices about which instruments you want to trade.