Correlated positions and the hidden triple risk
Three 1% risks in the same sector are not three risks — they are one large one wearing different tickers.
A recurring clinic moment: a trader shows three long UK mid-caps, each risking one percent to its own stop. A sector headline gaps all three. Account damage approaches three percent before any individual stop philosophy is “wrong.”
Name the shared driver
Ask whether the ideas share beta, commodity exposure, or a currency. If yes, treat concurrent risk as a pool. Cap the pool — for example 1.5% of equity across the cluster — and let individual sizes shrink until the pool fits.
FX pairs are not immune
Long EURUSD and long GBPUSD both lean on dollar weakness. Sizing each as if the other did not exist doubles dollar exposure. Clinics at Bishopsgate spend real time on this because spreadsheet risk and felt risk diverge here.
A practical check
Before sending the second order, write the first position’s risk in pounds and the second’s. If a single narrative would hit both stops, add the pounds. Compare the sum to your cluster cap. Adjust size on the newer idea first.