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Risk & Position Management
Risk-Reward Ratio
Definition
The ratio of potential loss to potential gain on a trade. For shorts, the maximum gain is bounded (price can only fall to zero) while the loss is unbounded (price can rise indefinitely) — making R/R discipline especially important.
Related Terms
Stop Loss
An order that automatically closes a position once a defined adverse price is reached. For a short, a buy-stop above the entry price caps the loss. Cascading stop-losses contribute to squeeze severity.
Position Sizing
Determining how much capital to allocate to a single position based on conviction, volatility, and account risk tolerance. Conservative short sellers cap positions at 1-3% of portfolio NAV.
See short selling in action
Explore real-time ASIC short position data for ASX stocks.