I just noticed that many people still don't really understand the concept of RR properly, even though it is very important in trading. RR is the ratio between the expected return and the potential risk, and it is a tool that helps answer the key question: "For every dollar I risk, how much will I get back?"

In practice, I see professional traders prioritize this matter first. Why? Because it helps you choose investments more accurately. Just imagine, if there are two options: investing in stock A with an expected profit of 20% but a risk of losing 50%, or investing in stock B with an expected profit of 10% but a risk of losing only 5%. Based on the return figures alone, most people would choose A. But if you calculate the RR, you'll find that B has an RR of 2, while A's RR is only 0.4. This means B is much more worthwhile.

The calculation isn't complicated at all. The formula is RR = (Target Price - Entry Price) / (Entry Price - Stop Loss Price). Let's try a real example: buying BTS stock at 7.45 baht, expecting it to rise to 10.50 baht, with a stop loss set at 4.50 baht. The RR would be (10.50 - 7.45) / (7.45 - 4.50) = 3.05 / 2.95 ≈ 1.03. So, in this case, the RR is 1.03, meaning if the trade succeeds, you will gain 1.03 times more than the risk you took.

But there's another important aspect: the relationship between RR and Win Rate, which are "opposite" to each other. For example, if you use an RR of 3:1 and your trading system has a Win Rate of 25%, let's calculate: over 100 trades, winning 25 and losing 75. Total profit = 25 × 3 = 75. Total loss = 75 × 1 = 75. The net result is zero. So, to make a real profit, your Win Rate needs to be higher than 25%. RR is a metric that must be considered together with Win Rate.

In professional analysis, the best RR is 2 or higher because it indicates that the reward is at least twice the risk. But that doesn't mean low RR isn't good. Some traders can profit even with a low RR if their Win Rate is high enough. Regarding risks, there are many types, such as liquidity risk, exchange rate risk, inflation risk, and political risk. All of these should be considered when calculating RR.

In summary, RR is a tool that helps you make rational investment or trading decisions. It isn't the only thing to look at, but it is a fundamental concept everyone should understand because investing without a good RR is like playing a game without knowing the rules. The outcome can be predicted to be what it is.