Finding the risk vs reward before making an entry on a stock is very important to me. I want to know what I am risking and for what reward.
If a friend asks to borrow $100 and promises to pay me back plus $10 my risk to reward is 1:1.1. This means I am risking $1 to make $1.10 on this deal. Now, if my buddy says he will pay me back $200 my risk vs reward just became 1:2, much better than the 1:1.1 previously calculated.
For me, I stick to a 1:3 risk vs reward ratio for every position I take. If I am going to risk money to make money I want to make sure I am getting a good deal within a reasonable amount of time which is usually around a month for me.