What is the reward:risk ratio The reward-to-risk ratio (RRR) is among the most important metrics that traders use to evaluate the potential profitability of a trade against its potential loss. Essentially, this ratio quantifies the expected return on a trade in comparison to the level of risk undertaken. Calculated by dividing the potential profit by the potential loss, a high reward-to-risk ratio signifies a more favorable trade opportunity, whereas a low ratio suggests the opposite. But there is so much more to the reward-to-risk ratio as we will explore in this article. Calculating the reward-to-risk ratio Calculating the reward-to-risk ratio is not complicated. Assuming a trader is evaluating a potential short trade idea (screenshot below) with the current entry price 15387.8, a Stop Loss at price 15565.8, and a Take Profit price 14854.6, getting to the reward-to-risk ratio is very straightforward: First, you calculate the ...