Portfolio heat: the one number that keeps you solvent
Position sizing is a solved problem. Risk 1% per trade, place your stop where the idea is wrong, size accordingly. Most traders who have been at it a year or more do this correctly.
And then they hold nine positions at once, and discover that disciplined sizing on every individual trade does not add up to a disciplined portfolio.
The arithmetic nobody does
Nine open positions, each sized at a clean 1% of equity. Each has a stop where it should be. Every trade is correct in isolation.
Total exposure if the market gaps against you: 9%. In a single session. That's a bad quarter arriving in one morning, and nothing in your per-trade process warned you, because per-trade nothing was wrong.
Portfolio heat is the sum of every open position's risk-to-stop, expressed as a percentage of your current equity. It's what you actually stand to lose if every stop you hold gets hit.
Why "capital deployed" isn't the same thing
Most journals show how much capital you have in the market. That number is nearly meaningless for risk.
A ₹5,00,000 position with a 2% stop risks ₹10,000. A ₹1,00,000 position with a 20% stop risks ₹20,000 — one fifth the capital deployed and double the actual risk.
Heat measures risk. Deployed capital measures involvement. Conflating them is how traders end up feeling conservative while carrying more exposure than they've ever had.
Measured against current equity
A subtle point that matters more than it looks. Heat must be divided by your current equity — base capital plus everything you've made or lost — not by your opening balance.
Use the opening balance and the same rupee at risk reads as hotter and hotter as your account grows, and cooler than reality after a drawdown. It's backwards in both directions, precisely when accuracy matters most.
(This was a real bug in an early build of Trader Blueprint, found while auditing the calculations. It's fixed, and worth mentioning because it's an easy mistake to make in a spreadsheet too.)
What a reasonable number looks like
There's no universal answer, but the shape of the guidance is consistent:
| Heat | Reading |
|---|---|
| Under 4% | Conservative. Comfortable through most conditions. |
| 4–8% | Normal for an active swing trader in a healthy market. |
| Above 8% | Hot. A single bad session materially damages the account. |
| Above 12% | One correlated gap from a very bad month. |
Trader Blueprint shows heat at the top of the Open Positions tab and turns it red past 8%.
Correlation makes it worse
Heat assumes each position is independent. They rarely are.
Six positions across five different sectors at 6% heat is roughly what the number says. Six positions in banking stocks at 6% heat is not — in a sector-wide selloff they move together, and you take most of that 6% at once rather than a fraction of it.
This is why the schema records sector and industry on every instrument. Exposure analysis by sector is the natural next step, and the data is already being captured for it.
The practical use
Heat turns "should I take this trade?" into a question with an answer. You're at 7% heat and a good setup appears: the trade is fine, but taking it puts you at 8%. You can size it smaller, close something marginal first, or pass.
All three are reasonable. Not knowing you were at 7% is not.