In this way, someone asked us, "What exactly is the RR value?" and how important it is for trading. Here, I want everyone to understand clearly that the Risk Reward Ratio is not just a random number, but a real tool that helps us make smarter investment decisions.

Simply put, the RR value is the ratio between the money we might lose and the money we expect to gain. If we invest one baht and risk losing 50 satang but have a chance to make 1 baht profit, the RR of this investment is 2. The higher this number, the more it indicates that the investment is worthwhile.

We often see professional traders mention RR first. Why? Because it helps us understand "For every 1 baht we risk losing, how many baht can we potentially gain?" If the RR is 3, it means we stand to gain 3 baht if we win, but only risk 1 baht. This makes it very important for money management.

The calculation is not as complicated as you might think. Use the formula RR = (Target Price – Entry Price) / (Entry Price – Stop Loss Price). Let’s look at an example: Suppose we see BTS stock at 7.45 baht, and we think it will reach 10.50 baht. But if the price drops to 4.50 baht, we need to exit. Here, RR = (10.50 – 7.45) / (7.45 – 4.50) = 3.05 / 2.95 ≈ 1.03. This means if we win, we will get a return 1.03 times the risk.

But this is where most people go wrong. The ideal RR should be 2 or higher. If it’s lower, it’s like risking more but gaining less—not worth it. For example, if RR = 3 and our Win Rate is 25%, over 100 trades, we win 25 times, making 75 baht profit, but lose 75 times, losing 75 baht—breaking even. But if our Win Rate is 30%, then we have a net profit.

What we need to remember is that RR and Win Rate are inversely related. If RR is high, Win Rate tends to be lower. If RR is low, Win Rate needs to be higher. Therefore, investors should choose strategies that match their skills. Some prefer RR = 1:1 with a 60% Win Rate and still profit; others prefer RR = 3:1 with only 30% Win Rate and still make gains.

Investment risks come in many forms: Liquidity Risk (may not be able to sell when needed), Currency Risk (exchange rate fluctuations), Interest Rate Risk (changes in interest rates), Inflation Risk (inflation eroding value), and Political Risk (political situations). All these affect our investment’s RR.

We often see tables showing that RR = 0.2:1 requires an 83.34% Win Rate to break even; RR = 1:1 needs 50%; RR = 2:1 needs 33.34%; RR = 3:1 needs 25%. Clearly, the higher the RR, the lower the Win Rate needed.

Ultimately, the RR value is a smart tool to help choose investments, but it’s not the only indicator. It should be considered alongside business fundamentals, market volatility, and your trading system. Now that you understand RR, go check out different investment options on Gate and calculate their RR to see better opportunities.