Risk/reward ratio compares what you stand to lose if wrong against what you stand to gain if right. CFI's master-trader checklist: only take trades where being right pays much more than being wrong costs. Reject setups where a $50 loss is possible but $10 is the realistic upside — the math is hostile even with good analysis.
Operational rules
- Use stop-loss orders; never let one trade threaten the account (position-sizing).
- Skip trades without a favorable, low-risk entry — a valid reversal with bad entry is still a pass.
- Positive risk/reward is necessary, not sufficient; you still need edge and process review.
Alexander Elder's line in the source: "The goal of a successful trader is to make the best trades. Money is secondary." Focus on setup quality; P&L follows distribution of outcomes.
Sources
- the-complete-guide-to-trading
- position-sizing
- trading-psychology
- art-of-trading-with-light-su-zhu-and-hasu — invalidation and nullification discipline