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Risk Management

Risk-Reward Ratio

Definition

The risk-reward ratio compares the potential loss of a trade (distance to stop loss) to the potential gain (distance to take profit target). A 1:2 ratio means the trader risks $1 to potentially make $2. Maintaining a favorable risk-reward ratio allows traders to be profitable even with a sub-50% win rate, making it a cornerstone of sound futures trading strategy development.

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