Glossary

What risk-reward ratio means in crypto.

Risk-reward compares planned downside with planned upside before entry.

Updated Mar 2026

Definition

Risk-reward ratio compares the amount a trader could lose if the stop is hit with the amount that could be made if the target is reached.

In practice

It helps decide whether a setup is attractive before entry. Even a setup with a solid win rate can underperform if the downside is too large relative to the reward.

The mistake is treating one fixed ratio as a universal rule. The goal is to use it as a planning filter tied to the setup and market condition.

Related reading

See how the term shows up in a real practice session.

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