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Market Intelligence › Basic Terminologies
The risk of one trade is small, what is the sum of ten trades?
Published by The Retail Trader · AUG 01, 2026 · Risk Management
It seems sensible to take one percent risk on every trade. But if fifteen trades are open simultaneously, your total risk is fifteen percent – and that is not visible anywhere.
Portfolio heat is the total risk of all your open positions — the losses for each position from entry to stop, summed up.
This number changes daily. Increases when taking a new trade, decreases when the stop is moved up, goes out when the position is closed.
Determining a maximum heat is a practical rule:
• If the total heat is above a limit, no new trade, no matter how good the setup seems.
• Correlated positions should count as one hi trade.
• Moving the stop in profit higher reduces the heat and creates new space.
• Writing down the number of heat daily is the basic rule.
The worst losses often don't come from one wrong trade — they come from ten perfect trades that all went wrong together on one day. Heat limit is the only thing that stops our scenario.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.