A good rule

Never risk more than 2% of your account equity on any one investment, trade, or recommendation.

This is for any trading you do on your own. The only exceptions: Long-term core positions where you are not using any kind of leverage or margin.

But for short-term investing - day-trading and position trading - you should never risk more than 2% of your account equity on any one trade.

Why? Let's say you have $100,000 to trade with. If you risk 10% of your equity on every trade and you experience 10 losers in a row, you're wiped out. You are out of capital, and out of the game.

Even if you lose nine in a row, you've lost 90% of your equity ... you then have only one chance left to be right. And just to make back all the losses and breakeven, you have to hit one heck of a windfall profit on that 10th trade.

On the other hand, if you risk only 2% on each trade, you have twice as many opportunities to be right.

You have 20 opportunities instead of 10. And with 20 opportunities, the probability of you being right on any one trade goes up exponentially. And so does the probability of a winner that will run to full profit potential, helping to not only wipe out any losses you incurred, but to also push your account firmly into positive territory.