Every investment demands an unqualified amount of risk and for a fortune-hunter to designate a complimentary tribute this risk has to be compensated duly. This reward is in the form of something called the risk premium or handily the premium. Risk is consequently central to accrual markets or investing because without risk there can be no gains. Successful investors use accrual designate risk supervision strategies to minimize the risk and maximize the profit.
Keeping your losses less than your gains is the key to sustained trading success. Limiting or managing your greatest possible loss is often easier than figuring out your maximum possible profit.
The biggest problem that investor psychology has is that they always look towards the Reward side and ignoring the Risk Profile of the investments. While Fancy returns are always possible.
Let’s look at these 3 scenarios, these are the systems with corresponding profitability
| A | Profitable | 50% |
| B | Profitable | 20% |
| C | Profitable | 8% |
But they can only be achieved by taking higher risks. If suppose we have 3 different avenues of Investments with the corresponding Rewards, it seems obvious that the Investment in A category is the most suitable for any investor with a supreme return of 50%