Risk-reward ratio compares what you plan to lose if a trade fails with what you plan to make if it reaches target. A 1:2 setup risks one unit to seek two units.
Use it before entry
Set the invalidation point and target before taking the trade. If the numbers only work after moving the stop or target, the trade is not being planned clearly.
Do not use it alone
A high ratio can still be poor if the target is unrealistic. A lower ratio can still work if the setup wins often enough. Track the ratio and outcome across a sample, then review it alongside drawdown and setup quality.
The goal is not to force every chart into one ratio. It is to know the tradeoff before risk is live.
