Risk Reward Ratio

Risk Reward Ratio In an earlier post, I talked about position sizing. Basically, if you don't want to lose your shirt in the stock market, you have to buy "smartly" - never placing a good portion of your money on a rather risky stock. That tells you how much to buy. But how do you know if that stock was worth pursuing in the first place? That's where the risk/reward ratio comes in. If you're going to make a risky investment, you might as well take the one with the highest payoff, right?
In an earlier post, I talked about position sizing. Basically, if you don't want to lose your shirt in the stock market, you have to buy "smartly" - never placing a good portion of your money on a rather risky stock.

That tells you how much of a stock to buy. But how do you know if that stock was worth pursuing in the first place? That's where the risk/reward ratio comes in.
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