While money management needs to be something that every serious trader considers, it's something that will vary greatly from trader to trader, depending on their style, capital, risk tolerance, goals, etc. There is no one right answer here, each person needs to figure out what works best for them and the market they trade.
I see from your example that you're using a 2% stop loss, but that may not be enough depending on what you're trading. For something extremely volatile, 2% is just going to result in many stop outs right away. I highly recommend not using just some arbitrary amount for all your trades, I would use what works best for that security.
First off, figure out the liquidity of the stock you're trading. Ideally you want your position to be a small amount of the average daily traded volume. If liquidity isn't an issue, then figure out what you're willing to risk on each trade in dollar terms. Finally, figure out how large your stop loss should be based on the volatility of the stock and where the most relevant support lies at.
Say you're willing to risk $500 on a trade, which is 2% of your current account value. Then let's say that you're trading a pretty volatile stock and there's some support about 5% - 8% below your entry. To give it room to wiggle, you set your stop loss at 10%, since that will hopefully keep you in the trade if the market should go stop hunting and try to take out stops that are set right below that same support line you're watching. So you're willing to risk $500, and you want your stop set at 10%, so therefore your position should be $5000. $ amount willing to risk divided by stop loss percentage = $500/ 10% = $5000 (your position size).
Now say you're scalping a much less volatile stock, and say you're only aiming for 4%-5% and you figure a 2% stop loss is good enough to work with. Risking the same amount of money, $500, will then tell you that you can trade with a $25k position. $500/ 2% = $25k.
These are just a couple of examples, but it's an idea of what you should be looking at. Arbitrary stop $ amounts %s don't make sense since traders and stocks/markets vary so much. You'll be best off tailoring these things specifically to your needs and what you're trading.
Originally Posted by vasudel
My question is, for flipping stocks which of the following is efficient interms of money mgmt & loss prevention?
Splitting the money into 10%($2500) for each trade & if my all picks are bad I will loose max 20% total loss
Splitting the money into 20 or 25% for each trade & if my all picks are bad i will loose max 8-10% total loss
$25000 is the total account value & $3 is the commision for each transaction.
Ingeneral how much a trader use for flipping stocks ?.