How to Measure Risk Across All Your Open Positions

One trade at a time is not the whole picture

Sizing each position so that a stop costs a fixed share of the account is the usual starting point, and it answers one question: what does this trade cost if it fails. It does not answer the one that ends accounts, which is what several open trades cost if they fail together.

Positions fail together more often than the trade list suggests, because currency pairs are not independent instruments. They are combinations of the same handful of currencies, and trades opened from one idea tend to share that idea's assumption. Three measurements, none of them complicated, describe the exposure the list is hiding.

Step one: add up what your stops are worth

For each open position, take the distance from the current stop to the entry, convert it into account currency, and add the results together. Read the total as a share of equity. That figure is your open risk: what the account loses if every stop is hit and each one fills at its level.

Two corrections make it honest. A position moved to break-even carries no risk and should count as zero. A position with no stop at all does not count as zero — its risk is undefined, which is the case for treating it as the largest number in the table rather than the smallest.

Step two: split the book into currencies

Every pair has two sides. Convert each position to its notional value, split it into the base and quote legs, and sum per currency. Long EUR/USD, long GBP/USD and short USD/CHF are three tickets and one short-dollar position; the total dollar exposure is what a policy statement or a broad move in risk appetite actually meets.

The arithmetic runs both ways, which is the useful part. Some pairs partly cancel, so an account can carry less real exposure than the number of tickets suggests, and the calculation tells you which of the two situations you are in before the market does.

Step three: read the figures already on your screen

The platform shows used margin, free margin and margin level without being asked. Used margin is what open positions have tied up; free margin is what remains to absorb adverse movement; margin level is the ratio the broker watches for a margin call and a stop-out. Falling free margin with an unchanged position list means the market has moved against you, or the broker has raised a requirement — both are worth noticing early rather than at the close-out level.

Setting a cap, and keeping it

A portfolio cap is a maximum share of equity that may be at risk at any one moment, decided in advance. Its value is that it turns an open question into a check made before opening the next position: if the new trade would breach the cap, the choice is to skip it, size it smaller, or tighten a stop elsewhere. A second cap on net exposure to any single currency limits the concentration that step two reveals. Both are arbitrary numbers; what makes them useful is that they exist before the trade rather than after it.

What the number cannot do

Open risk assumes every stop fills at its level, which a weekend gap or a fast market can deny. Correlations measured on past data change, sometimes precisely when a shock makes everything move together. And none of this says anything about whether the trades themselves are worth taking — it measures exposure, not judgement. What it does provide is a figure you can look at before adding one more position, which is the only moment at which any of it can still be changed.