The risk/reward ratio is a formula that allows us to compare the potential profit (reward) to the potential loss (risk) of a trade.
What Is A Good Risk/Reward Ratio?
In general your risk/reward ratio should be 1 or higher to make sure your profit is greater than the risk. The higher the ratio is the less hits the strategy needs to be successful.
The legendary Turtle-Traders realized risk/reward ratios about 50(!) or higher. That means taking an investment of 1.000€ with an outcome of 50.000€.
It is very common for retail traders to use a risk/reward ratio of 1,5 or higher. Nevertheless there are strategies with a risk/reward ratio of less than 1, too.