Module 32: Portfolio Management
Key Takeaways
- Manage total exposure, not just individual trades.
- Diversification reduces the impact of any single loss.
- Asset allocation balances risk against your goals.
Diversification
Diversification spreads risk across uncorrelated assets so one bad outcome doesn’t sink everything. Holding five highly correlated tech stocks is not diversified — they tend to move together. Mixing asset classes (e.g. equities, forex, gold) lowers overall portfolio volatility.
Asset allocation
Asset allocation is deciding what percentage of your capital goes to each market or strategy based on your risk tolerance and goals. A trader might allocate a portion to active trading and keep the rest in safer holdings. Watch correlation: opening three long trades on correlated pairs is effectively one big trade — your real risk is higher than it looks.
Track your total open risk across all positions, not just per-trade risk. Cap aggregate exposure (e.g. no more than 5% of the account at risk at once).
Frequently Asked Questions
Focus first on mastering one instrument. As your account grows, manage correlation and total exposure carefully.