Idea Incubator - Risk Exposure Table

I've decided to create a new label "Idea Incubator" for all post related to some idea I'm testing out. This time round, it is a method for tracking my current exposure to the markets.

We are aware that how organise information will affect the way that we trade. A person that constantly has only profit targets in sight can easily incur huge losses on the down side. If you had been trading long enough, you will realise that money management and trade management is a huge part of trading. So I thought.... let me test out a new method of tracking my current open positions (i.e. exposure to the markets) and see how that influences my trading.

It is probably something that most people do intuitively, or subconsciously. But for a information junkie like myself (not necessarily a good thing), here's a an idea to incubate - The Risk Exposure Table.

It is actually a fairly simple table. What you do is simply add in the respective boxes how much you can potentially lose (based on your stop loss) if your trades for that currency pair goes against you. I put my values in SGD because I do my money management in SGD terms, but any currency will work as well.

The Currency Exposure Column then tells you have much cash you exposure you have with that particular currency. So if I have a 100SGD Stop loss for AUDUSD, it will reflect $100 for AUD and $100 for USD.

The Total Exposure field tell me how much I stand to lose if ALL my currently open trades hit my stop-loss. A painful scenario if it occurs, but one I think as traders we need to keep in mind. This serves as the basis for money management as well. If I set a rule to risk no more than 2% of my total capital at any one time, this helps me to ensure that I follow my risk management rule.

On updating it, you only need to update it each time you enter or exit a position , or shift a stop loss. So if I tighten my stop-loss, this will reduce my exposure to the markets. Using my money management rules and this table, it tells me if I can enter another trade.

This is very useful since I sometimes get carried away with trading, or can end up trading too heavily on one currency. Test it out and see if you find it useful. Feedback and comments greatly welcomed!

Once again... here's the link : Risk Exposure Table