Module 8: Advanced Market Concepts

Portfolio Risk Management

6 min read

Risk must be managed across all open trades together, not just trade by trade.

Correlation

Many pairs move together. Being long EUR/USD, GBP/USD and AUD/USD at the same time is largely one bet against the US dollar. If each trade risks 1%, your real exposure to one dollar move may be close to 3%.

Practical limits

Set a maximum total open risk (for example 3–5% of the account), limit the number of correlated positions, and reduce size around major events that affect several positions at once.

Example: Hidden concentration

Short USD/JPY and long EUR/USD both profit if the dollar weakens. Two trades, one underlying idea.

Key takeaways

Correlated trades multiply risk.
Cap total open risk.
Think in terms of underlying exposures.

Educational content only, not financial advice. Trading forex and CFDs involves significant risk of loss.