So over the last several months I've been practicing in real time, a trading approach that has been working quite well for me. Where I need some help now is making sure I'm understanding correctly the FX margin requirements and how they pertain to my trading approach.
When I began practicing this approach in real time several months ago I used a $50,000 practice account from FXCM to make all of the trades. I didn't bother scaling the trade size to the account size because I simply wanted to test the approach and figured I would worry about position sizing to account sizing later on if I felt the trading results were viable. As a result, I didn't really pay attention to margin requirements as I was putting trades on.
After doing this for a number of months now I'm quite pleased with the results and how things are progressing. What I want to do now is to now start being more precise in regards to matching position size to account size. Since FX scales wonderfully, I'm trying to figure out what percentage of the account (regardless of the dollar size of the account) I could risk per trade while not falling into margin problems.
I've attached an excel spreadsheet that lists all of the information I've tracked around my trades. In that spread sheet I've calculated the margin requirements + amount of the account I'm risking per trade to figure the total amount needed to 'fund' each trading opportunity. What's tricky is that my approach is a swing trading approach not a day trading approach and as a result it's very normal for me to hold positions for several days at time which ties up trading capital within the account.
What might raise some eyebrows is that I illustrated in the spreadsheet a 7% account risk per trade. I don't want to necessarily focus in on the 7% number from the standpoint of whether or not it's an 'appropriate' amount to risk per trade (I'm not a newbie when it comes to trading and I certainly understand the risk associated with potentially risking that much per trade). Rather, what I want to understand is if I'm missing something in regards to the margin amounts + the per trade risk. Based on my analysis in the spreadsheet it looks like I need 3-5x in margin OVER what my risk is on most of the trades. Where that becomes an issue is when I have 4 or 5 different trades running at once and the margin + amount risked per trade looks like it is greater then the total account size.
If you look at my results in the spread sheet, it looks like this would come up quite a bit because the margin requirements + the amount set aside for the risk on the trade would eat up all of my capital in the account. Thus I would need to drop my % risk per trade from say 7% down to a lower number (perhaps 4% or 5%).
I would certainly like the option to be more aggressive earlier on with a smaller account in regards to the amount I'm risking per trade since I could start scaling back % risked per trade over time as the account grows. It appears though that I might need to accept the fact that I'd have to lower my % risked per trade in order to stay out of margin problems. Can anyone give me some feedback on this or tell me if I'm missing something?
When I began practicing this approach in real time several months ago I used a $50,000 practice account from FXCM to make all of the trades. I didn't bother scaling the trade size to the account size because I simply wanted to test the approach and figured I would worry about position sizing to account sizing later on if I felt the trading results were viable. As a result, I didn't really pay attention to margin requirements as I was putting trades on.
After doing this for a number of months now I'm quite pleased with the results and how things are progressing. What I want to do now is to now start being more precise in regards to matching position size to account size. Since FX scales wonderfully, I'm trying to figure out what percentage of the account (regardless of the dollar size of the account) I could risk per trade while not falling into margin problems.
I've attached an excel spreadsheet that lists all of the information I've tracked around my trades. In that spread sheet I've calculated the margin requirements + amount of the account I'm risking per trade to figure the total amount needed to 'fund' each trading opportunity. What's tricky is that my approach is a swing trading approach not a day trading approach and as a result it's very normal for me to hold positions for several days at time which ties up trading capital within the account.
What might raise some eyebrows is that I illustrated in the spreadsheet a 7% account risk per trade. I don't want to necessarily focus in on the 7% number from the standpoint of whether or not it's an 'appropriate' amount to risk per trade (I'm not a newbie when it comes to trading and I certainly understand the risk associated with potentially risking that much per trade). Rather, what I want to understand is if I'm missing something in regards to the margin amounts + the per trade risk. Based on my analysis in the spreadsheet it looks like I need 3-5x in margin OVER what my risk is on most of the trades. Where that becomes an issue is when I have 4 or 5 different trades running at once and the margin + amount risked per trade looks like it is greater then the total account size.
If you look at my results in the spread sheet, it looks like this would come up quite a bit because the margin requirements + the amount set aside for the risk on the trade would eat up all of my capital in the account. Thus I would need to drop my % risk per trade from say 7% down to a lower number (perhaps 4% or 5%).
I would certainly like the option to be more aggressive earlier on with a smaller account in regards to the amount I'm risking per trade since I could start scaling back % risked per trade over time as the account grows. It appears though that I might need to accept the fact that I'd have to lower my % risked per trade in order to stay out of margin problems. Can anyone give me some feedback on this or tell me if I'm missing something?
