So according to your rules . if you have $10,000 you risk $1000 ( spread over several trades ) and then use $5000 to open positions . Leaving $4000 unused in your account.
Yes, but that's not how I look at it. It's still $5000, the risk is not loss yet. It is not unused, it is used to maintain margin required and prevents getting a margin call if the market goes against your positions temporarily.
This is how I set up the risk for any given strategy.
Suppose you have a system that trades 1000/year, probibility of losing trades = 0.5
You need to figure out how many consecutive losing trades your system is probably going to get. The formula is:
probable consecutive losing trades = ln( trades ) / -ln(probablity of losing trades)
Plugging in 1000 and 0.5, we get 10. The more you trade, the likelier this is going to occur. I like to double or even triple this number. Let's work on triple of this value, 30, to determine what risk whould we take for a single trade.
If the drawdown you want is 35%, divide this by the consecutive losing trades, 30, and we get 1.17% This should be the risk you take for each trade. You can use a higher dd% even 100% if your are adventurous.
My margin rule is not needed if you do not add to positions nor trade many pairs. If you do, you need something like my rule to prevent your system from using up all your balance for margin. Remember if you equity falls below required margin you get a margin call. Margin required depends on your account's leverage.
My strategy trades 28 pairs and also adds to existing positions. I don't want to commit all my balance to margin so I use this rule. Unfortunately, when it stops trading, I don't know whether the ones that I did not trade are going to be winners or losers. So I have some opportunity loss, but it's better than real loss.