Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Risk reward ratio definition

The risk-to-reward ratio evaluates the level of potential downside to an investment, compared to the potential gains.

Risk reward ratio definition

The risk-to-reward ratio evaluates the level of potential downside to an investment, compared to the potential gains.

While different strategies form different ratios, the general rule is a risk-to-reward ratio of over 1.0 means the possible risk is greater than the possible reward, and anything below 1.0 means the possible profits are greater than the potential risk.

Stop-loss orders and derivatives allow investors to manage the risk-to-reward ratio. Using a stop-loss order, the risk is calculated to be the difference between the price paid for the investment versus the stop-loss order. This figure is then compared to the profit target set by the investor, calculated by the difference between the price paid for the investment and the anticipated profit.

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