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How to Compute the Stock's Risk Reward Ratio
Updated: 2020-05-31T16:24:49Z

In order for you to profit in the Stock Market, you need to be a Risk Taker. However, in order to survive it…You need to be a Risk Manager.

Risk Reward Ratio-How Much Risk Are You Willing to Take for a Reward?
"brown-wooden-mouse-trap-with-cheese-bait-on-top" by Skitterphoto is licensed under CC BY 4.0

Calculating your risks before entering a trade is a fundamental skill that needs to be learn early on. By knowing the Risk/Reward ratio, you will be able to discern if your particular set up is a winner or not.

To properly set it up, you need the three mandatory variables

  • Entry Price
  • Target Price
  • Stop Loss Price

Refer to my article Risk Reward Ratio–How Much Risk Are You Willing to Take for a Reward? if you want to know the gritty details of the calculation. If you prefer the smart/easier path, use this calculator - Risk Reward Ratio Calculator.

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