Risk management with open positions

In the examples above we have assumed that we are able to simply use the current value of a trading account balance for computation of the amount of risk you are willing to be exposed to on each trade. This is fine if you do not currently have any open positions and your account balance is a true reflection of all of the funds currently available to you. But what if you already have an open position, or several open positions? These open positions would have resulted in a reduction in the capital available in your trading account, by an amount equal to the margin requirements if trading margin FX.

Thus, if you simply use your current account balance as the basis for determining the amount of funds you are willing to risk on the next trade, each subsequent trade following the first will be of an artificially smaller size due to the fact that the available funds reflected in your account balance have been reduced by the amount of margin required to fund your existing open positions.