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How many trades should you have open?
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
Knowing how many trades you should have open at the same time should be part of any forex trading strategy. No matter which stage of trading you are at (beginner, professional etc.), you should always know how many open positions you can have at same time. When you are just starting out you may find it very helpful to only have between one and three positions open at one time.
This is the case for all beginners when they first start to trade; they are learning to identify and interpret all market indicators which go into making successful and profitable trades. For example, you will be monitoring short and long-term charts and market news while at the same time remembering the big picture information such as overall market trends as well as security and economic fundamentals.
Keeping the number of trades you have to the minimum will give you enough time to react to all of the market's developments and how they relate to your trades; if you are starting out and you have too many positions open at the same time you might be forced to end the trading session
before the exit point of your trades. Your goal at first should be to have enough trades and positions open to give yourself the training to have multiple information inputs and situations to follow.
When you start trading forex based on your account balance and your trading strategy you should calculate how much percentage of your account you are comfortable to risk. Let’s say your account balance is $5,000 and your are willing to risk 5% of your balance, this would mean that at no time when you are trading should more than $250 of your account be at risk.
In other words, if all stop losses are reached whether you have one or more open positions, no more than $250 would be lost. Taking the above in consideration, if each pip is worth $1 you could take 1 position with 250 pip stop (based on 5% of a $5000 account) or 2 positions with 125 pip stops etc. You should also keep in mind that you don’t always have to take on as many positions as your account size will allow you.