What is the percentage method, and how do I use it?
The percentage method is one of the simplest and most common ways to set a stop loss percentage for day trading. Using a fixed percentage of your capital or your entry price as your stop loss level is the idea. For example, if you have $10,000 in your trading account and risk 1% per trade, your stop loss level will be $100 below your entry price. The advantage of this method is that it is easy to calculate and apply. It also helps you maintain a consistent risk-reward ratio and avoid risking too much or too little on each trade. The disadvantage of this method is that it does not consider the volatility or the technical factors of the market or the security. Depending on the market conditions, it may also result in setting your stop loss too tight or too loose.