What is Portfolio Heat?
Portfolio heat sums risk at stop (or max loss) across open trades, often as % equity.
Formula
Portfolio Heat (%) = [ Σ (Entry Price − Stop Price) × Position Size ] ÷ Account Equity × 100
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Portfolio Heat shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Portfolio Heat on Nifty (24,300): define rupee risk per trade before the 9:15 open; index gaps on global cues can skip planned portfolio heat levels — use exchange-supported stop types and size for gap beyond stop.
Reliance Industries perspective
Portfolio Heat for Reliance (₹1,300): stock circuits and 20% band limits can trap positions past your planned exit; keep portfolio heat outside circuit freeze zones where possible.
Bank Nifty futures perspective
Portfolio Heat on Bank Nifty (55,000): span margin changes intraday — a valid portfolio heat at entry may be too large after a margin hike; recheck buying power before adding lots.
How to validate
- Minimum sample: 30 closed trades on one strategy tag before trusting Portfolio Heat.
- Check for one outlier week inflating Portfolio Heat — export largest winners and losers.
- Recompute Portfolio Heat after including brokerage, STT, and slippage on F&O tags.
- Compare Portfolio Heat on the same date range as profit factor and max drawdown.
How to track in TradeLyser
- Open Strategy Board or analytics → filter by strategy tag and review period.
- Locate the widget or column reporting Portfolio Heat (or export trades to compute manually).
- Store snapshot values in weekly review: Portfolio Heat, profit factor, drawdown, trade count.
- If Portfolio Heat is custom, add a spreadsheet column fed from TradeLyser CSV export.
Best practices
- Publish Portfolio Heat per strategy, not only at account level.
- Use the same calculation window (weekly vs monthly) year-round.
- Pair Portfolio Heat with sample size in every review slide or note.
- Document formula used so mentors interpret the same number.
Common pitfalls
- Changing rules after fewer than 20 trades because Portfolio Heat moved slightly.
- Mixing intraday and positional tags when computing Portfolio Heat.
- Ignoring costs so Portfolio Heat looks better than banked P&L.
- Letting one outlier trade dominate the Portfolio Heat reading.
How to use this in TradeLyser
Sum open risk before new entry; block adds when heat exceeds plan cap.
Related terms
Correlation scales from −1 to +1 between return series of two symbols or strategies.
Diversification reduces reliance on any single outcome by holding multiple positions, strategies, or instruments with imperfect correlation.
Position sizing translates account risk into quantity. With a ₹2,000 risk cap and ₹40 stop per share, size is 50 shares — before lot multiples on F&O.
Risk per trade is the planned loss at your stop — not the notional value of the position. A ₹10 lakh notional trade might risk only ₹3,000.
FAQ
Heat with undefined stops?
Use worst-case or structure stop for each open idea.
Heat limit typical?
Many use 3–6% total open risk — define yours.
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