While this doesn't relate only to day trading, I find position...

While this doesn't relate only to day trading, I find position sizing is vital. It can be as simple as deciding what % of your capital you are prepared to put at risk on each trade - more than 2% is probably too much, working out what this figure is in dollar terms (1), deciding on an entry and stop level, finding the difference between the two (2), then dividing (1) by (2).

This is 'how many' shares you should buy. Should you get stopped out at your stop loss level, you will only have lost the % of your capital that you decided on above.

Your capital will now be slightly more or less than you started with (depending on whether you had a profit or loss). Now you risk the same % of your capital on the next trade, but it will be a different dollar amount.

In this way you can 'theoretically' never go broke.

The link below explains this and more in greater detail for those interested in learning a vital and often disregarded part of trading (position sizing/money management)

http://iitm.com/Site-Map.htm

See the six links under 'Tharp Concepts'

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