If trading two positively correlated pairs, you should:

Cut individual risk in half. Correlated positions effectively double your risk. Halve individual position size.

Risk Management Pro

Advanced position sizing and portfolio risk

Professional risk management goes beyond simple 1% per trade:

1. Correlation-adjusted risk: If trading two correlated pairs, cut individual risk in half.

2. Volatility-adjusted sizing: Use ATR to normalize position sizes across different instruments.

3. Risk budgets: - Max per trade: 1-2% - Max daily loss: 3-5% - Max weekly loss: 5-8% - Max monthly drawdown: 10-15%

4. Scaling: - Scale in: Add to winners at predetermined levels - Scale out: Take partial profits to lock in gains - Pyramiding: Add at each trend continuation signal

5. Recovery rules: After max drawdown, reduce risk to 0.5% and rebuild.

Pro tip: Professional traders never risk the same amount on every trade. They adjust based on confidence, correlation, and volatility..

Common mistake: Same 1% risk regardless of market conditions. Better: Reduce risk in choppy conditions, increase slightly in clear trends.

Key takeaways

Adjust risk for correlation and volatility
Use daily/weekly/monthly risk limits
Scale in/out for better average entries
Reduce position size during drawdowns

Quiz

If trading two positively correlated pairs, you should: Answer: Cut individual risk in half. Correlated positions effectively double your risk. Halve individual position size.

Educational content, not financial advice.