Calculate your risk-to-reward ratio from entry, stop loss, and take profit. Know if a trade is worth taking before you place it.
The risk-to-reward ratio compares potential loss vs gain. A 1:2 ratio means you risk $1 to make $2.
Formula: R:R = (Take Profit − Entry) ÷ (Entry − Stop Loss)
Most professional traders target a minimum of 1:2. At 1:3 you can be profitable even with only a 40% win rate. Avoid trades below 1:1 unless your win rate is very high.