When you are just starting out, you may find it very helpful to only have between one and three positions open at one time. This is due to the fact that when you are first starting to day trade you are learning to identify and interpret all of the market indicators that go into making successful and profitable trades. For example, you will be monitoring the short and long-term charts and the market news while at the same time remembering the overall big picture information, such as overall market trends as well as security and economic fundamentals.

Keeping the number of trades you have to the minimum will give you enough time to react to all of the market’s developments and how they relate to your trades. At first you might find that watching the market develop and seeing it make your positions (and fortunes) go up and down a bit thrilling and overwhelming at the same time. It takes some time to realize that it is real money in your account, just as it takes time to learn how to feel the emotions of winning and losing trades.

It often takes time to be able to comprehend all of the information on a trading screen. If you are starting out and you have too many positions open at one time, you might suffer from fatigue very quickly and have to end the trading session before the exit point of your trades.

If you keep the number of trades you have open to three or less, you will also be allowing yourself time to analyze each trade after it has been closed out. Your goal at first should be to have enough trades and positions open to give yourself the training to have multiple information inputs and situations to follow, but at the same time not to have too many things going on as to lose track of good trades, or worse yet, suffer from information overload.

Moving to More Positions

After you have got the knack of day trading with three positions, you can gradually move to higher amounts of total positions open. Keep in mind, however, that when you have a great deal of trades open and you are using margin, you are running the risk of the losses compounding into your margin account even faster. For example, let’s say you usually trade five currency pairs, commodities (a gold ETF) and equities (an S&P ETF.) You have your currency account set to a margin of 50:1, and you are using the following risk-management parameters: at 50:1 margin, total FX positions will not exceed 33 percent of available margin at the time of the trade. You trade the gold ETF and the S&P ETF in an equity day trading account with 50 percent margin max. You decide to use the additional use of across sector risk management of one-third commodities, one-third equity, and one-third FX in your total investment portfolio.

With this ratio you are able to have $4,995 in commodities (gold ETF), $4,995 in equities (S&P ETF), and $11,088.90 in each of the currency pairs or crosses per $10,000 in your total day trading account.