Portfolio Heat

How to add up the risk across all your open positions, why too much “heat” is dangerous, and simple limits that keep a bad day from becoming a disaster.

Risk adds up

Risking 1% per trade is a good start, but it is only half of the picture. If you hold ten positions at once, each risking 1%, you have 10% of your account at risk if every stop is hit. That total is often called portfolio heat or open risk.

Stops tend to get hit together, too. When the market drops sharply, most stocks fall at the same time. Portfolio heat tells you how badly one rough week could hurt.

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