Portfolio Heat for Chart Traders
A practical way to measure open risk across correlated setups so one theme cannot sink the week.
Technical analysts who run several setups at once often track each trade carefully and still overheat the book. The issue is correlation: three long breakouts in the same sector are not three independent risks.
Define heat as open risk, not open positions
Sum the cash at risk from entry to stop across open trades. Cap that total as a percentage of equity—many desks start between 3% and 6%. When a new chart idea would push heat above the cap, either cut size or wait for an existing risk to close.
Group by theme
Tag positions by theme: index beta, USD strength, semiconductor momentum, and so on. Apply a tighter sub-cap inside each theme so one narrative cannot consume the entire risk budget. Chart quality does not cancel theme concentration.
Review at the open
Before adding risk, glance at heat and theme tags. This thirty-second check prevents the familiar mid-session surprise where three winners and one large loser were actually one idea wearing three tickers.