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How many forex positions can be open together?
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
We have previously answered the question: Do you trade the proper lot size in your forex account? There are plenty of new traders who did not understand the importance of trading the proper lot size and how it affects their overall portfolio and trading performance. Too many trade a lot size which is far too excessive for their portfolio size and over the long-term are faced with heavy losses as a result of that.
Today we will cover how many trading positions your forex portfolio can hold while not exposing you to a dangerous amount of risk. Most new traders only focus on profits, but fail to realize that risk management is what they need to master first before they manage a portfolio as this will protect their bottom line and allow them to keep trading.
While there is no correct answer about how many trading positions can be or should be open in a trading portfolio there are some guidelines traders may want to keep in mind as they built their trading portfolio.
Here are some points to consider:
How much risk per trade are you comfortable with? - Again, this is dependent on the preference of the trader and it will greatly influence the total exposure. Those who are very conservative may cap their risk at 1% per trade
while the average picks a target between 2% and 3%. More aggressive traders and those who trust their strategy may go between 5% and 10%. This is risk per single trade and not a combination of all trades.
How much do you trust your strategy? – This one is also very important and again comes down to the individual trader and their knowledge as well as experience with their preferred trading strategy. Those traders who are still working out their forex trading strategy or who are fine tuning it should reduce their risk exposure while those who are comfortable with their strategy due to several years of live data and live trading experience may increase their risk if desired.
How much total risk are you willing to expose yourself to? – This is the final variable in determining how many forex trades you can have open simultaneously. Conservative traders may want to have no more than 25% of their total assets exposed while the average may cap this at 50%. Those who are more aggressive can go as high as 80%.
How many forex positions can be open simultaneously?
Here is an example of how you can calculate it and answer the question. Please keep in mind that everything depends on your own preference and there is no right or wrong answer:
Assuming you are willing to expose yourself to 3% risk per trade and are willing to have a total risk profile of 45%. This would mean that you can have a total of 15 trading positions open at the same time (45% divided by 3%). This would be a moderately aggressive set-up and not ideal for new traders who lack the experience in properly managing an account.