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Risk Management

Risk management basics include understanding exposure, trading volume, position size, lots, and how market movements may impact an account.

Risk management is important because it helps limit potential losses and supports more controlled trading activity.

The risk-reward ratio compares potential loss to potential gain for a specific trade setup.

The risk-reward ratio is calculated by comparing the distance between the entry and potential loss to the distance between the entry and potential gain.

The risk-reward ratio indicates how the potential outcomes of a trade compare with possible losses and gains.