Module 4 — Risk & position sizing
Risk-to-reward, honestly
6 minute read
In plain English
Risk-to-reward compares what you risk with what you would make if your target were reached. It is a ratio, not a promise.
Why it matters
A 3:1 ratio means nothing if the target is unrealistic. Ratios are only useful with achievable levels.
Example
Risking $0.20 to make $0.60 is 3:1 — but only if $0.60 of room actually exists before resistance.
Try this
For any trade idea, identify the nearest resistance first, then calculate the ratio.
Common mistake
Inventing a target that makes the ratio look good.
What this does not mean
A good ratio does not increase the probability of the outcome.
Educational content only. Not financial advice.