[Albert]

I have read in many places that you should risk up to 2% per trade to protect your capital in the long run. Does that principle apply to day trading? What do people generally risk per day trade?

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[John J]

I would be thinking about going much lower than 2% if you are day trading, more like 0.25%. If you go on a bad run and lose 5 trades in a row how will you feel being 10% down? That can be a serious blow mentally and hard to keep a cool head.

Day trading isn’t like position trading where you might only place a few trades over a whole year so you’ve got to lower that threshold. Just my opinion of course.

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[Albert]

This is amazing, thanks John. I don’t know why I didn’t clock that but makes sense to risk less, at least to begin with.

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[Sam Grey]

I agree. Less is more. Defo not more than 1%. Period.

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[Ronnie]

I get the logic of risking less per trade however isn’t there a counterargument that if you have a well tested strategy you may be leaving money on the table by being too conservative?

Some experienced day traders I know risk up to 2% per trade and still keep strong risk management by using very tight stop losses and rigorous trade selection criteria.

The key is having a solid strategy and the discipline to execute it.

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[John J]

Conservative yes, but prudent also. I would argue that the more experienced and confident you are in your setup the higher you can push that percentage level, but if it’s early days I’d be risking less.

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[Christian Harris]

As mentioned by a few traders above, a solid risk management strategy is to risk at most 1-2 % of your total trading capital on a single trade.

It’s also worth mentioning that you should aim for trades with at least a 2:1 or 3:1 reward-to-risk ratio to maintain profitability over time, even if not all trades are winners.

Adopting a balanced risk management strategy can mitigate the ROI impact of a bad run of trades.

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[James Barra]

It’s also worth checking out our guide to risk management in trading. We recently added an infographic on risk-reward ratios too in case helpful for readers.

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