Portfolio Heat
The total percentage of portfolio capital at risk across all open positions — a measure of aggregate portfolio risk.
Explained Simply
Portfolio heat is calculated by summing the dollar risk of every open position. If you have 5 positions each risking 1% of capital, your portfolio heat is 5%. Professional traders typically cap portfolio heat at 5-10% total. During high-confidence setups in favorable regimes, heat might run slightly higher. During uncertain markets or after a drawdown, heat should be reduced. Portfolio heat prevents the dangerous situation where multiple correlated positions all hit their stops simultaneously.
How Tradewink Uses Portfolio Heat
Tradewink tracks portfolio heat in real-time and uses it as a gate for new trades. When heat exceeds the configured maximum (default: 6%), no new positions are opened regardless of signal quality. The AI also reduces position sizes as heat approaches the limit, scaling down from full size to half size as heat goes from 4% to 6%. This prevents portfolio blowups during correlated sell-offs.
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See Portfolio Heat in action
Tradewink uses portfolio heat as part of its AI trading signal pipeline. Start getting signals that use this concept to find real opportunities.