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Old 08-05-2008, 09:54 PM
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David Waring David Waring is online now
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Location: Miami, FL
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Hi Jason,

Welcome to the community that's a great question you have raised.

When people say don't risk more than 2% they are normally referring to per trade. Most traders however will also have a maximum amount that they are willing to risk in the market at anyone time in addition to this however, which is often determined by how correlated the instruments are that they are trading.

So lets say for example you are trading long EUR/USD and Short USD/CHF and risking two percent on each. These currency pairs have such a high negative correlation (meaning that they move almost exactly opposite one another) that this would essentially be the same as having 1 position on where you were risking 4%.

Below is a link where you can find correlations for the different currency pairs if you would like to take this into account when determining the maximum you are willing to risk on all positions.

» Correlation table Mataf.net

Hope that helps. As always if there are any other questions or comments on this one please feel free to post them below.

Best Regards,
Dave
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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.
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