You can’t be a successful day trader without understanding and counteracting the risks. No trader has a perfect track record, and you must prepare for losses. The amounts of your losses, however, are always within your control. When you risk only 2 to 3 percent of your account balance, this minimizes your loss potential and keeps you afloat while still providing the chance to earn a profit.
One of the first steps you need to take when day trading is comparing your expected returns. Look at stocks you’re wanting to trade and then compare their projected returns. Now, pinpoint which ones make the most sense to invest in. Never invest more than 1 percent of your account balance on a single trade. This type of risky trading is setting you up for failure and huge losses. Even if you’ve heard through the grapevine to make more than a one percent investment because the stock is going to rise in value, don’t.
Day trading success is about finding a balance. You’re going to have losses, and you’re going to miss out on money-making opportunities from time to time because you chose not to invest more than 1 percent on a single trade. Finding this balance allows you to minimize your losses and enjoy long-term success as a day trader. You’ll also want to choose a daily stop-loss amount. Once you hit this amount, stop trading for the rest of the day. You’ll be glad you did, especially when you see over time how much money you’re saving by using the stop-loss concept.