Correlated risk

Risk & Position Sizing

Five trades that are really one trade

Risking 1% on five different tech stocks that all move together isn't really five separate 1% risks. If they're highly correlated, a single bad market day can hit all five at once, closer to a 5% risk in disguise.

Same driver, different label

Real diversification of risk means the positions don't all move for the same reason. Two currency pairs that both depend heavily on the same underlying US dollar move aren't nearly as separate as they look.

Check the shared driver before stacking

Before stacking several positions at once, checking whether they'd all lose on the same kind of news or the same market move is what separates real risk management from an illusion of it.