Changing risk % of capital after placing a trade?

Hi!

Might be a confusing title, but here’s the question a bit more in depth…

Let’s say I have 1000usd capital.
I place a trade with 1% risk, based off my 1000usd, in other words 10usd risked.

I still have money left I want to trade with, so I place another order… Do I base my risk % off my remaining capital after having placed my first trade, or do I base it off my new temporary capital (considering I have just put money into another trade)?

In advance, thanks!

ok, let’s get the terminology correct first

Capital = ACCOUNT BALANCE
Temporary Capital = EQUITY

  1. you should not be deciding this after a trade is placed, this should be decided before the trade is placed

  2. you need to work out HOW MANY MAX CONCURRENT TRADES YOU WANT TO TAKE ON

  3. you need to work out your Max Risk… so let’s say that’s 1 % of your ACCOUNT BALANCE,
    this then means that if you are prepared to put down NO MORE THAN 4 trades
    you are risking 0.25% per trade

because if you place a trade down (let’s call it Trade 1) and you have calculated that trade 1 is consuming 1% of your Account balance
and let’s assume you have factored in the MARGIN that is required for the trade as well… so it’s A TRUE 1% risk
and that you have calculated that given your lot size and distance to your stop loss THAT YOU WILL NOT EXCEED 1%

ok, so now when you place TRADE 2, you COULD base it off your ACCOUNT BALANCE, but this not a real representation (as you probably know) because , THE ACCOUNT BALANCE will show you the last balance , not including any current trades that are in a loss but still running

so… you then think
ok , martin… so go off EQUITY then
YES… this is a better option, but it keeps changing… right

so maybe go off equity but HALF THE EQUITY that is currently displayed
so let’s say equity is saying you have $912
well. half that so round off to around $460 ish now do 1% of that

but even if you do this, YOU ARE STILL RISKING MORE THAN 1 % over all

which is why you need to plan this stuff out before you place it

does that help

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