Risk Management Rules At The Portfolio Level

Risk management applied only trade by trade misses an important layer: how multiple open positions interact with each other. A trading plan should also define rules for total exposure across all open trades at once, not just risk on each individual one.

Two trades that seem independently small can combine into a much larger risk if they're correlated — for example, several positions that would all lose money in the same market scenario. Portfolio-level rules address this by capping combined exposure, not just per-trade risk.

• Set a maximum total risk allowed across all simultaneously open positions, not just per trade
• Account for correlation — treat closely related instruments as contributing to the same risk bucket rather than fully independent bets
• Define a maximum number of concurrent open positions to avoid spreading attention and risk too thin
• Set a daily or weekly maximum loss limit that, once hit, pauses new trades until the next review