Money Management in Day Trading : How Much Should You Risk ?

TradingFunda

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To Remain profitable in Day trading is a skill which cant be gained overnight.It requires lot of practice,high accuracy trading system,attention along with Money Management.

Money Management is a crucial element in Day trading as well as all type of trading like Swing Trade,Long Term Trading.

Here is some key ideas which will help you for Money Management in Day Trading.

First Question is How Much Should You Risk ?
The size of your trading position, is in direct proportion to the value of your portfolio.
The key to day trading success is to avoid big losers. You have seen your big losers wiped out your 50% gain in one trade. Avoid Big Losers.
You should not risk more than 1% of your capital in one trade.It doesn't mean that your stop loss must be at 1%.You should decide your trading size based on your 1% of Capital.

For Example : You have 10000 bucks to invest.Your Loss will be 100 bucks in One trade.Now come to Sizing of trade.You are buying Stock worth 100 bucks.Your Stop loss is at 97 bucks.So for each stock you are ready to lose 3 bucks.Your trade size will be 33,you should buy at 100 with Stop loss of 97.

If you have still some query in your mind feel free to ask on this forum.
 
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