Definition
The ratio of potential loss to potential gain on a trade. A 1:3 ratio means risking $1 to potentially make $3 — generally considered favorable.
Related Trading terms
Day Trading
Buying and selling financial instruments within the same trading day to profit f…
Swing Trading
A strategy of holding positions for several days to weeks, aiming to capture pri…
Scalping
An ultra-short-term trading strategy that aims to profit from small price change…
Technical Analysis
Evaluating securities by analyzing statistical trends from trading activity — pr…
Fundamental Analysis
Evaluating a security's intrinsic value by examining financial statements, indus…
Candlestick Chart
A price chart where each 'candle' shows the open, high, low, and close for a tim…
Explore the full glossary
Browse 350+ finance, crypto, and fintech terms across 12 categories in the Digital.Finance glossary.