Risk Management
Monitor and manage your portfolio risk
Risk Management
Monitor and manage your portfolio risk with comprehensive risk metrics and alerts.
Risk Dashboard
Access risk metrics from Risk in the sidebar.
Journal-Specific Analysis
The Risk Dashboard automatically filters by your currently selected journal:
- A badge at the top shows which journal's data you're analyzing
- Risk metrics are calculated only from that journal's positions
- Switch journals from the Journal page to compare risk across portfolios
Tip: Use separate journals for different strategies to get accurate risk analysis for each approach.
Overview Metrics
| Metric | Description | Target |
|---|---|---|
| Portfolio Beta | Market sensitivity | Depends on style |
| Value at Risk (VaR) | Max expected daily loss | < 2% of portfolio |
| Current Drawdown | Distance from peak | < 10% |
| Position Concentration | Largest position % | < 20% |
Position Risk
Individual Position Metrics
For each open position:
| Metric | What It Shows |
|---|---|
| Position Size | % of portfolio |
| Unrealized P&L | Current gain/loss |
| Distance to Stop | % to stop loss |
| Beta | Stock's market correlation |
| Volatility | Recent price volatility |
Position Sizing Rules
Recommended limits:
| Rule | Conservative | Moderate | Aggressive |
|---|---|---|---|
| Max single position | 5% | 10% | 20% |
| Max sector exposure | 20% | 30% | 50% |
| Max correlated positions | 3 | 5 | 10 |
Portfolio Risk Metrics
Beta Analysis
| Beta | Meaning |
|---|---|
| < 0 | Moves opposite to market |
| 0 | No market correlation |
| 1 | Moves with market |
| > 1 | More volatile than market |
| > 2 | Significantly more volatile |
Value at Risk (VaR)
Estimates maximum loss over a time period:
| Confidence | Interpretation |
|---|---|
| 95% VaR | 95% of days, loss won't exceed this |
| 99% VaR | 99% of days, loss won't exceed this |
Example: 95% Daily VaR of $500 means: - On 95% of days, you won't lose more than $500 - On 5% of days (about once a month), you might
Drawdown Analysis
| Metric | Description |
|---|---|
| Current DD | How far from portfolio peak |
| Max DD | Largest historical drawdown |
| Avg DD | Average drawdown depth |
| DD Duration | How long in current drawdown |
Correlation Analysis
Correlation Matrix
Shows how your positions move relative to each other:
| AAPL | GOOGL | MSFT | BND | |
|---|---|---|---|---|
| AAPL | 1.00 | 0.82 | 0.85 | -0.15 |
| GOOGL | 0.82 | 1.00 | 0.78 | -0.12 |
| MSFT | 0.85 | 0.78 | 1.00 | -0.18 |
| BND | -0.15 | -0.12 | -0.18 | 1.00 |
Interpretation
| Correlation | Risk Implication |
|---|---|
| > 0.7 | High - positions move together |
| 0.3 to 0.7 | Moderate correlation |
| -0.3 to 0.3 | Low correlation (good diversification) |
| < -0.3 | Negative - natural hedge |
Risk Alerts
Setting Risk Alerts
- Go to Risk > Alerts
- Click Add Alert
- Configure trigger:
| Alert Type | Example Trigger |
|---|---|
| Drawdown | Portfolio drops > 5% from peak |
| Position Size | Any position > 15% of portfolio |
| VaR Exceeded | Daily VaR > $1,000 |
| Correlation | Two positions > 0.9 correlation |
| Beta | Portfolio beta > 1.5 |
Alert Actions
When triggered: - Email notification - In-app alert - Optional: Auto-reduce position
Risk Limits
Setting Limits
Configure maximum acceptable risk:
| Limit | Setting |
|---|---|
| Max Daily Loss | Stop trading if hit |
| Max Position Size | Won't allow larger |
| Max Drawdown | Alert at threshold |
| Max Leverage | For margin accounts |
Enforcement
- Soft limits: Warning only
- Hard limits: Prevents action
Scenario Analysis
Stress Testing
See portfolio impact under scenarios:
| Scenario | Impact |
|---|---|
| Market -10% | Portfolio -12% |
| Market +10% | Portfolio +11% |
| Sector crash | Portfolio -8% |
| Interest rate hike | Portfolio -3% |
Custom Scenarios
Create your own: 1. Click New Scenario 2. Set market/sector moves 3. Calculate portfolio impact
Risk Reports
Daily Risk Summary
Automated daily email showing: - Current risk metrics - Any limit breaches - Position changes
Weekly Risk Review
Comprehensive weekly report: - Risk trend analysis - Correlation changes - Recommendations
Configure in Settings > Notifications.
Risk Management Best Practices
The 1% Rule
Never risk more than 1% of your account on a single trade:
Position Size = (Account × 1%) / (Entry - Stop Loss)
Example: - Account: $50,000 - 1% risk: $500 - Entry: $100 - Stop: $95 (5% stop) - Position: $500 / $5 = 100 shares
The 2% Rule
Never have total portfolio risk exceed 2%: - If you have 4 open positions - Each can only risk 0.5%
Diversification Rules
| Rule | Description |
|---|---|
| Asset classes | Mix stocks, bonds, alternatives |
| Sectors | No more than 30% in one sector |
| Geographies | Include international exposure |
| Correlations | Seek uncorrelated assets |
Common Risk Mistakes
| Mistake | Consequence |
|---|---|
| No stop losses | Unlimited downside |
| Correlated positions | False diversification |
| Too much size | Catastrophic losses possible |
| Ignoring drawdowns | Emotional decisions |
| Revenge trading | Compounding losses |
Risk vs Reward
Risk/Reward Ratio
Before every trade, calculate:
R:R = Potential Profit / Potential Loss
| R:R | Minimum Win Rate Needed |
|---|---|
| 1:1 | 50% to break even |
| 2:1 | 33% to break even |
| 3:1 | 25% to break even |
Kelly Criterion
Optimal position sizing based on edge:
Kelly % = (bp - q) / b
Where: - b = odds received (reward/risk) - p = probability of winning - q = probability of losing (1-p)
Most traders use "half Kelly" to be conservative.