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Novices often risk more than X Scalper Even if you're starting out with a small day trading float, you should practice good money management. You need to position yourself so that you can endure long strings of losses, and maintain your day trading system. When the market does turn around, you'll be in the market positioned to capitalize on it's moves. That's what setting the maximum loss is all about, it keeps you in the market, allowing to you to keep your day trading system going. If you can survive some losses in your day trading, the profits will come.When traders first begin considering their stop losses, keep in mind this comment from Tom Baldwin, a leading day-trader. He said, "The best traders have no ego


Successful traders are faced with losses constantly, and they swallow their pride and get out of the position when they have to. This allows traders to survive in the market long enough to be successful. Traders set their stop losses, and then stick to the plan

How do traders go about setting stop losses? There are several different ways. Traders could base a stop loss on a percentage retracement, where the allowed share prices retrace a certain percentage of the entry price before the exit. Different indicators can be used to identify where the stop loss is going to be set. Traders could also use support and resistance stops to set the level at which exit is made. The key is to simply have a stop loss in place.


Personally, I find these options too subjective. I prefer having a mechanical way to calculate my stop losses, so I use a volatility based stop. The reason I use this type of stop is because volatility generally represents a measurement of how quickly the stock either rises or falls (market noise). Consequently, if I measure the stocks volatility, and take a multiple of that value, I'm probably going to have set my stop loss beyond the immediate noise of the market. This ensures I am not stopped out of a position too often.



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