What is a safe portfolio heat level?

This tool treats under 3% effective heat as Conservative, 3-5% as Moderate, 5-8% as Aggressive, and 8% or more as Dangerous. The built-in default Max Heat limit is 6%, with a warning once effective heat crosses it. Many risk-managed traders cap total open risk at 4-6%, but the right ceiling depends on your strategy and drawdown tolerance.

What is the difference between naive and effective heat?

Naive heat simply adds the stop-loss dollar risk of every open position and divides by your balance, assuming the trades are independent. Effective heat re-aggregates those same risks using each pair's 1-day correlation, so correlated same-direction trades count as more concentrated. The two numbers match when there is a single position or when all positions are perfectly correlated and same-direction; otherwise effective heat is lower.

How does the calculator handle correlated currency pairs?

It looks up the historical 1-day correlation between every pair of open positions and feeds it into the effective-heat formula. Same-direction trades use the correlation as-is; opposite-direction trades flip its sign, modelling a partial hedge. Any two positions whose direction-adjusted correlation exceeds 0.70 trigger a visible Correlation Warning so you can spot hidden concentration.

How is the diversification score calculated?

The score is round((1 − average direction-adjusted correlation) × 100), clamped between 0 and 100, measured across every pair of open positions. Each pair contributes the absolute value of its correlation multiplied by +1 for same-direction trades or −1 for opposite-direction trades. A single position scores 100. Strongly correlated same-direction trades push the average up and the score down. It is colour-coded green at 60 and above, amber from 30 to 59, and red below 30.

Does this calculator use my real-time account or live prices?

No. You enter the account balance, lot sizes, entry and stop prices manually, and risk is computed from those inputs using fixed pip values and stored historical correlations. Nothing is connected to a live broker feed or your real account. Positions and settings are saved only in your own browser and can be exported as a JSON backup.

What inputs does each position need?

Each position requires a pair, a direction (long or short), a lot size, an entry price and a stop loss. Take profit is optional; it is used only to display the reward-to-risk ratio and does not affect heat. Dollar risk is computed as the stop distance in pips multiplied by the pip value for that lot size.

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Forex Tools

In this section, you’ll find a collection of useful Forex trading tools specially made for forex traders. Each tool is designed to save time, support better analysis, and make trading more efficient. Whether you need calculators, converters, or strategy helpers, this section will provide everything you need to manage your trades with ease and accuracy.

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