Let’s say someone has a brokerage account with $50,000 in it. How much of it should they trade in order to reduce risk but also make some money? How do you reduce risk in your Day Trading?
The answer to this depends largely on the risk of the strategy. If you had an absolutely riskless system (impossible but just for the sake of argument), of course you would risk a lot. But for just starting out, I’d recommend using none of the margin at all and only investing a portion of the equity itself. Or better yet, paper trade (see below).
Be sure you’ve got a genuinely profitable strategy, because most people (over 90%, according to most studies) lose much or all of their captial within a fairly short period of time. If you’re not sure about this, or even if you think you are, then you should "paper trade" or simulate your trading. Most brokerages now offer paper trading features. This will also give you a much better idea of how much you want to risk. But even then, there’s a lot of risk (simulators aren’t perfect, and things change).
