The U.S. model has been distorted in the last ten years, misleading people into thinking that the risk- reward ratio is comfortably tilted toward equities.
While you may not get the perfect average price, we believe the risk-reward ratio is much more favorable when you wait for consolidation set-ups occur.
But ask yourself: what is my risk-reward ratio in buying and owning stocks right now so late in the cycle, not to mention all the volatility versus owning stocks in a clear uptrend?
Although my buy rules had me initiating a few positions on the long side, my interpretation of the risk-reward ratio is keeping my exposure to a minimum and my position sizes small.
Based on March 26's close and historical trading activity, Way determines the IGN to have a 3-to-1 favorable risk-to-reward ratio with a 13% upside and a -4% downside.