[{"data":1,"prerenderedAt":1298},["ShallowReactive",2],{"\u002Fglossary\u002Fwhat-is-correlation-risk":3,"\u002Fglossary\u002Fwhat-is-correlation-risk-related":364},{"id":4,"title":5,"body":6,"category":348,"date":349,"description":350,"draft":351,"extension":352,"meta":353,"navigation":351,"path":354,"related":355,"seo":360,"stem":361,"term":362,"updated":349,"__hash__":363},"glossary\u002F5.glossary\u002Fwhat-is-correlation-risk.md","What Is Correlation Risk? Why Diversification Fails",{"type":7,"value":8,"toc":340},"minimark",[9,13,18,27,38,41,108,111,114,159,162,166,174,182,190,194,212,220,236,240,297,301,332],[10,11,12],"p",{},"Correlation risk is the exposure created when positions or accounts that look independent are driven by the same factor and therefore lose together. It is why an apparently diversified book produces a single, undiversified drawdown: the risk was counted once per position, but it arrives all at once.",[14,15,17],"h2",{"id":16},"how-it-works","How it works",[10,19,20,21,26],{},"The pairwise coefficient belongs to ",[22,23,25],"a",{"href":24},"\u002Fglossary\u002Fwhat-is-forex-pair-correlation","forex pair correlation",". At book level what matters is how many independent bets it leaves you with.",[28,29,34],"pre",{"className":30,"code":32,"language":33},[31],"language-text","Independent bets = n ÷ ( 1 + (n − 1) × ρ )\n\nn = number of positions\nρ = average correlation between them\n","text",[35,36,32],"code",{"__ignoreMap":37},"",[10,39,40],{},"Three positions each risking 1% of the account:",[42,43,44,60],"table",{},[45,46,47],"thead",{},[48,49,50,54,57],"tr",{},[51,52,53],"th",{},"Average correlation",[51,55,56],{},"Combined risk",[51,58,59],{},"Independent bets",[61,62,63,75,86,97],"tbody",{},[48,64,65,69,72],{},[66,67,68],"td",{},"ρ = 0",[66,70,71],{},"1.73%",[66,73,74],{},"3.0",[48,76,77,80,83],{},[66,78,79],{},"ρ = 0.7",[66,81,82],{},"2.68%",[66,84,85],{},"1.25",[48,87,88,91,94],{},[66,89,90],{},"ρ = 1",[66,92,93],{},"3.00%",[66,95,96],{},"1.0",[48,98,99,102,105],{},[66,100,101],{},"ρ = −0.5 (the floor for three)",[66,103,104],{},"≈ 0%",[66,106,107],{},"—",[10,109,110],{},"The trader believed they had risked 1% three times. At ρ = 1 they risked 3% once. Nothing on the platform announces the difference.",[10,112,113],{},"Correlated exposure arrives through five channels, and most books carry several at once:",[115,116,117,125,136,142,153],"ul",{},[118,119,120,124],"li",{},[121,122,123],"strong",{},"A shared currency leg."," Long EUR\u002FUSD, GBP\u002FUSD and AUD\u002FUSD is one short-dollar position in three costumes.",[118,126,127,130,131,135],{},[121,128,129],{},"One strategy across many symbols."," A single ",[22,132,134],{"href":133},"\u002Fglossary\u002Fwhat-is-an-expert-advisor","Expert Advisor"," trading twelve pairs generates twelve positions from one signal condition.",[118,137,138,141],{},[121,139,140],{},"One strategy across many accounts."," The same EA copied onto four accounts is one bet at four times the size; total capital at risk is what matters, not capital per account.",[118,143,144,147,148,152],{},[121,145,146],{},"A shared regime dependency."," Every ",[22,149,151],{"href":150},"\u002Fglossary\u002Fwhat-is-trend-following","trend-following"," system in a book suffers the same choppy market, whatever it trades.",[118,154,155,158],{},[121,156,157],{},"A shared venue."," Same broker, same price feed, same execution. A feed outage or a requote storm hits every position at once.",[10,160,161],{},"And ρ is not a constant: in quiet markets the components decouple and the book genuinely looks diversified, then in a liquidity event they converge toward 1.",[14,163,165],{"id":164},"why-it-matters","Why it matters",[10,167,168,169,173],{},"Correlation risk breaks the arithmetic ",[22,170,172],{"href":171},"\u002Fglossary\u002Fwhat-is-position-sizing","position sizing"," depends on. A 1%-per-trade rule is a promise about the worst case, and it only holds if the trades are independent. Ten correlated positions at 1% is a 10% day through a rule followed exactly.",[10,175,176,177,181],{},"It hits ",[22,178,180],{"href":179},"\u002Fglossary\u002Fwhat-is-margin-level","margin level"," the same way: correlated positions move into floating loss together, so equity falls across the whole book while used margin stays put, and the stop-out threshold approaches faster than any single-position analysis predicted.",[10,183,184,185,189],{},"It also makes track records misleading. Four accounts each showing a modest ",[22,186,188],{"href":187},"\u002Fglossary\u002Fwhat-is-drawdown","drawdown"," may have printed all four on the same three days: four data points read separately, one in fact.",[14,191,193],{"id":192},"what-the-data-shows","What the data shows",[10,195,196,197,200,201,204,205,200,208,211],{},"On ShowMyTrades (August 2026), ",[121,198,199],{},"699 users run more than one account"," and ",[121,202,203],{},"429 run accounts at more than one broker",". Across the public accounts with trading history, median autotrading share is ",[121,206,207],{},"99%",[121,209,210],{},"53.9% run above 90% automated",". These describe accounts published here, not traders in general.",[10,213,214,215,219],{},"Those figures set the scale. More than half of all users hold multiple accounts and roughly a third spread them across brokers, usually to avoid depending on one counterparty. That diversifies the counterparty, not the strategy: if the same automated system runs on both, ",[22,216,218],{"href":217},"\u002Fguides\u002Fsame-strategy-different-brokers","two brokers deliver one equity curve twice",", and a near-total autotrading share makes that the default case.",[10,221,222,223,227,228,231,232,235],{},"The outcomes are consistent. ",[22,224,226],{"href":225},"\u002Fglossary\u002Fwhat-is-maximum-drawdown","Median deepest drawdown"," is ",[121,229,230],{},"9.7%",", yet ",[121,233,234],{},"17.6% of accounts have passed 50%",". Falls of that depth are rarely one position going wrong; they are a set of positions that turned out to be the same position.",[14,237,239],{"id":238},"where-you-see-it-on-showmytrades","Where you see it on ShowMyTrades",[115,241,242,259,275,281,291],{},[118,243,244,245,248,249,253,254,258],{},"The ",[121,246,247],{},"Breakdown Statistics"," module and its ",[250,251,252],"em",{},"By Magic Number"," tab, which splits the record by strategy rather than by instrument. Two ",[22,255,257],{"href":256},"\u002Fglossary\u002Fwhat-is-a-magic-number","magic numbers"," with the same good and bad stretches are one system wearing two labels.",[118,260,261,267,268,200,271,274],{},[121,262,263],{},[22,264,266],{"href":265},"\u002Fguides\u002Fcustom-analysis-and-filter-presets","Custom Analysis",", which filters by ",[121,269,270],{},"Symbols",[121,272,273],{},"Magic Numbers",". Recomputing the figures with one magic number excluded shows how much of the record depended on it. The saved preset list is hidden on public pages; the filters are not.",[118,276,244,277,280],{},[121,278,279],{},"Growth"," view in the charts viewer, read across two account pages. Two curves with the same peaks and troughs on the same dates are one strategy whatever they are called.",[118,282,283,284,290],{},"A ",[121,285,286],{},[22,287,289],{"href":288},"\u002Fglossary\u002Fwhat-is-a-trading-portfolio","portfolio",", which merges several accounts into one aggregated view — equity curve, statistics and metrics combined. That total is what correlation risk applies to, not the per-account figures.",[118,292,244,293,296],{},[121,294,295],{},"trades table"," with its Magic Number and Comment columns, showing which system opened what and when.",[14,298,300],{"id":299},"common-misunderstandings","Common misunderstandings",[115,302,303,309,315,321],{},[118,304,305,308],{},[121,306,307],{},"\"I trade eight pairs, so I am diversified.\""," If seven quote against the dollar, you hold one dollar position sized eight times.",[118,310,311,314],{},[121,312,313],{},"\"Different brokers means diversified risk.\""," It diversifies counterparty and execution, which is worth having. It does not diversify a strategy running identically on both.",[118,316,317,320],{},[121,318,319],{},"\"Correlation is stable enough to plan around.\""," It is measured in normal conditions and converges toward 1 in the conditions that create large drawdowns.",[118,322,323,326,327,331],{},[121,324,325],{},"\"Long one pair and short a correlated one cancels the risk.\""," It replaces a directional bet with a cross bet, and you pay two ",[22,328,330],{"href":329},"\u002Fglossary\u002Fwhat-is-a-spread","spreads"," and two swaps to hold it.",[10,333,334,335,339],{},"For how to see combined exposure rather than four separate pages, read ",[22,336,338],{"href":337},"\u002Fguides\u002Ftracking-multiple-accounts-portfolio","tracking multiple accounts in a portfolio",".",{"title":37,"searchDepth":341,"depth":341,"links":342},2,[343,344,345,346,347],{"id":16,"depth":341,"text":17},{"id":164,"depth":341,"text":165},{"id":192,"depth":341,"text":193},{"id":238,"depth":341,"text":239},{"id":299,"depth":341,"text":300},"Risk","2026-08-19T00:00:00.000Z","Correlation risk is running several positions or accounts that are really one bet. How correlated exposure multiplies drawdown, and what thousands of traders show.",true,"md",{},"\u002Fglossary\u002Fwhat-is-correlation-risk",[356,357,358,359],"what-is-forex-pair-correlation","what-is-drawdown","what-is-position-sizing","what-is-margin-level",{"title":5,"description":350},"5.glossary\u002Fwhat-is-correlation-risk","Correlation Risk","GNhwqG_ozOXL3dDKSqbVGKoxSZ4aW1o00RqKg9Mychw",[365,574,827,1098],{"id":366,"title":367,"body":368,"category":563,"date":349,"description":564,"draft":565,"extension":352,"meta":566,"navigation":351,"path":187,"related":567,"seo":571,"stem":572,"term":493,"updated":349,"__hash__":573},"glossary\u002F5.glossary\u002Fwhat-is-drawdown.md","What Is Drawdown? Definition, Formula and Real Numbers",{"type":7,"value":369,"toc":556},[370,373,375,378,384,387,390,423,425,428,435,440,443,453,455,460,475,478,480,502,517,519,549],[10,371,372],{},"Drawdown is the decline in an account's value from a previous peak down to a subsequent low, expressed as a percentage of that peak. It measures how far the account fell from its own best point, not how much it lost on any single trade. Because it accumulates, a 20% drawdown can be built out of forty small losses just as easily as out of one disaster.",[14,374,17],{"id":16},[10,376,377],{},"Every account carries a running high-water mark: the highest value it has ever reached. Drawdown is the distance below that mark at any given moment.",[28,379,382],{"className":380,"code":381,"language":33},[31],"Drawdown % = (Peak value − Current value) \u002F Peak value × 100\n",[35,383,381],{"__ignoreMap":37},[10,385,386],{},"The mark only moves up. When a new high is printed, the high-water mark resets to it and drawdown returns to zero. Until then, every day below the peak is a day in drawdown, whether the account is falling or grinding sideways.",[10,388,389],{},"Three distinctions decide what the number actually means:",[115,391,392,402,408],{},[118,393,394,397,398,401],{},[121,395,396],{},"Relative vs absolute."," Relative drawdown is the percentage above. Absolute drawdown, as MetaTrader reports it, is the fall below the ",[250,399,400],{},"initial deposit"," in currency — a completely different figure that can read 0% on an account currently 40% below its peak.",[118,403,404,407],{},[121,405,406],{},"Equity vs balance."," Equity drawdown counts floating losses on open positions. Balance drawdown counts only closed trades, so a loss that is never realised never appears in it.",[118,409,410,413,414,417,418,422],{},[121,411,412],{},"Current vs maximum."," Current drawdown is where the account sits today. The historical worst is ",[22,415,416],{"href":225},"maximum drawdown",", and it is the figure most ",[22,419,421],{"href":420},"\u002Fglossary\u002Fwhat-is-a-track-record","track records"," quote.",[14,424,165],{"id":164},[10,426,427],{},"Drawdown is the constraint that decides whether a strategy is investable, because losses and gains do not compound symmetrically. A 20% fall needs a 25% gain to get back to even. A 50% fall needs 100%.",[10,429,430],{},[431,432],"img",{"alt":433,"src":434},"A 10% loss needs an 11.1% gain to undo it, 25% needs 33.3%, 50% needs 100%, 70% needs 233%","\u002Fimages\u002Farticles\u002Frecovery-asymmetry.svg",[10,436,437],{},[250,438,439],{},"Past 50%, the recovery is a bigger job than the loss that caused it.",[10,441,442],{},"It is also the number that removes people from the market. Almost nobody quits during a fast, violent fall — the emotion there is hope. They quit in month nine of a flat recovery. Depth is only half of it; duration is the other half, and it is invisible on a returns chart.",[10,444,445,446,200,448,452],{},"And drawdown is the direct output of ",[22,447,172],{"href":171},[22,449,451],{"href":450},"\u002Fglossary\u002Fwhat-is-a-stop-loss","stop-loss"," discipline, far more than of entry quality. Two traders with identical signals and different lot sizes produce identical win rates and completely different survivability.",[14,454,193],{"id":192},[10,456,457,458,339],{},"The figures below describe accounts published on ShowMyTrades. They are not a survey of traders in general. Across the published accounts that have trading history (August 2026), drawn from 15,436,464 synchronised trades, the median deepest drawdown ever reached is ",[121,459,230],{},[10,461,462,463,227,467,470,471,474],{},"Set that against what the same accounts earned. The median ",[22,464,466],{"href":465},"\u002Fglossary\u002Fwhat-is-time-weighted-return","time-weighted return",[121,468,469],{},"+3.2%",", and ",[121,472,473],{},"63.0%"," of them are positive over time. The middle account here therefore gave up roughly three times its eventual return in peak-to-trough decline along the way: the risk absorbed is larger than the result, and larger by a multiple rather than a margin.",[10,476,477],{},"That ratio, not the raw depth, is what makes a drawdown figure readable. A published claim of large gains beside a two- or three-percent drawdown is not impossible, but it sits at the outer edge of this distribution, and the rest of the account page is where an edge case has to be justified.",[14,479,239],{"id":238},[10,481,482,483,486,487,490,491,494,495,501],{},"On every published account page, the ",[121,484,485],{},"Account Stats"," panel carries two figures on consecutive rows, immediately below ",[121,488,489],{},"Avg Monthly %",": ",[121,492,493],{},"Drawdown",", measured on equity so floating losses on open positions are included, and ",[121,496,497],{},[22,498,500],{"href":499},"\u002Fglossary\u002Fwhat-is-drawdown-on-balance","DD on Balance",", measured on closed results only. Both are historical maxima rather than today's reading, and both come from the broker feed rather than from the account owner.",[10,503,504,505,507,508,511,512,516],{},"The charts module has a ",[121,506,493],{}," view that plots daily drawdown as bars over the life of the account. That is where the ",[250,509,510],{},"duration"," of a decline becomes readable instead of inferred, which no single headline percentage can convey. The ",[22,513,515],{"href":514},"\u002Ftools\u002Fdrawdown-calculator","drawdown calculator"," runs the recovery arithmetic on your own balance.",[14,518,300],{"id":299},[115,520,521,527,533,543],{},[118,522,523,526],{},[121,524,525],{},"\"Drawdown is my biggest losing trade.\""," It is not. It is a cumulative peak-to-trough path that can contain hundreds of trades, including winners.",[118,528,529,532],{},[121,530,531],{},"\"My drawdown went back to zero after I recovered.\""," Current drawdown did. Maximum drawdown never falls, by design — it stops a good quarter from erasing a bad one.",[118,534,535,538,539,339],{},[121,536,537],{},"\"Low drawdown means low risk.\""," On a young account it usually means untested. The median published account here has 171 closed trades; below a few hundred, ",[22,540,542],{"href":541},"\u002Fguides\u002Fhow-much-history-a-track-record-needs","a small drawdown is a sample size, not a risk profile",[118,544,545,548],{},[121,546,547],{},"\"Balance drawdown is the real one.\""," It is the flattering one. Grid and averaging-down systems keep balance drawdown small precisely by refusing to close losers.",[10,550,551,552,339],{},"For how drawdown reads alongside every other number on an account page, see ",[22,553,555],{"href":554},"\u002Fguides\u002Freading-a-trading-account-dashboard","how to read a trading account dashboard",{"title":37,"searchDepth":341,"depth":341,"links":557},[558,559,560,561,562],{"id":16,"depth":341,"text":17},{"id":164,"depth":341,"text":165},{"id":192,"depth":341,"text":193},{"id":238,"depth":341,"text":239},{"id":299,"depth":341,"text":300},"Metrics","Drawdown is the peak-to-trough fall in an account's value, in percent. Here is the formula, why it is cumulative, and what thousands of real trading accounts show.",false,{},[568,358,569,570],"what-is-maximum-drawdown","what-is-a-stop-loss","what-is-a-profit-factor",{"title":367,"description":564},"5.glossary\u002Fwhat-is-drawdown","DMQq_wxULyvtTewFH3EendlyxckASOfp4LLweDXbTKY",{"id":575,"title":576,"body":577,"category":816,"date":349,"description":817,"draft":351,"extension":352,"meta":818,"navigation":351,"path":24,"related":819,"seo":823,"stem":824,"term":825,"updated":349,"__hash__":826},"glossary\u002F5.glossary\u002Fwhat-is-forex-pair-correlation.md","What Is Forex Pair Correlation? Hidden Concentration",{"type":7,"value":578,"toc":809},[579,586,588,591,597,604,615,617,620,626,629,640,642,653,669,682,684,730,739,767,769,802],[10,580,581,582,585],{},"Forex pair correlation is the degree to which two currency pairs move together, expressed as a coefficient between −1 and +1. It exists because every pair is a ratio of two currencies, so any two pairs sharing a currency are partly the same bet. A trader holding ",[22,583,584],{"href":354},"three correlated positions"," is not diversified across three trades — they hold one larger position, sized by accident rather than by decision.",[14,587,17],{"id":16},[10,589,590],{},"The coefficient is the covariance of two return series divided by the product of their standard deviations.",[28,592,595],{"className":593,"code":594,"language":33},[31],"ρ = cov(A, B) \u002F (σA × σB)\n\nρ = +1.0        identical movement\nρ =  0.0        unrelated\nρ = −1.0        exactly opposite\n|ρ| > 0.7       treat the two as one position for sizing\n",[35,596,594],{"__ignoreMap":37},[10,598,599,600,603],{},"The mechanism is arithmetic, not sentiment. Long EUR\u002FUSD, long GBP\u002FUSD and long AUD\u002FUSD are three ways of being short the dollar; when the dollar strengthens, all three lose at once. Long EUR\u002FUSD, long EUR\u002FGBP and long EUR\u002FJPY are three ways of being long the euro. And a pair can be inversely correlated by construction: EUR\u002FUSD and USD\u002FCHF have the dollar on opposite sides, so long one and long the other is close to holding nothing at all while paying ",[22,601,602],{"href":329},"spread"," on both.",[10,605,606,607,610,611,614],{},"Two properties make it dangerous. Correlation is ",[121,608,609],{},"unstable"," — a coefficient measured over the last month is not a fact about the pairs, it is an observation about the last month. And it ",[121,612,613],{},"rises in stress",": exactly when diversification is supposed to help, correlations converge towards 1 as flows move into and out of the dollar wholesale.",[14,616,165],{"id":164},[10,618,619],{},"Risk from correlated positions multiplies rather than adds. Combined exposure follows the same rule as any two-asset portfolio.",[28,621,624],{"className":622,"code":623,"language":33},[31],"σ_total = √( σA² + σB² + 2 × ρ × σA × σB )\n",[35,625,623],{"__ignoreMap":37},[10,627,628],{},"At ρ = 0, two 1% positions combine to about 1.4% of exposure. At ρ = 0.9, they combine to about 1.95% — nearly the full sum. Three such trades, each within a sensible per-trade risk limit, breach the account limit together while every individual rule was respected.",[10,630,631,632,634,635,639],{},"This is how accounts with disciplined ",[22,633,172],{"href":171}," still produce large drawdowns. Nothing in the rulebook was broken. It counted positions instead of exposure, and the ",[22,636,638],{"href":637},"\u002Fglossary\u002Fwhat-is-volatility","volatility"," of the combined book was two or three times what the trader believed.",[14,641,193],{"id":192},[10,643,644,645,648,649,652],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), ",[121,646,647],{},"1,724,575 lots"," have been traded, and the median account holds ",[121,650,651],{},"171 closed trades"," — enough for concentration to be visible on the symbol breakdown, and enough for a single correlated cluster to dominate the record.",[10,654,655,656,227,658,660,661,664,665,668],{},"The drawdown distribution is where undeclared concentration shows up. ",[22,657,226],{"href":225},[121,659,230],{},", but ",[121,662,663],{},"38.2%"," of accounts have fallen more than 20% from a peak and ",[121,666,667],{},"17.6%"," have lost over half their peak value. Losses of that size on an account trading small individual sizes usually mean many positions moved as one.",[10,670,671,672,200,675,470,678,681],{},"Offsetting the exposure instead of closing it has a running cost, and it shows up in the totals. These accounts have paid ",[121,673,674],{},"$4,782,670 in commissions",[121,676,677],{},"$862,547 in swap",[121,679,680],{},"86.3%"," of the accounts that hold positions overnight pay net negative swap. Two pairs held against each other keep that meter running while cancelling much of the risk they were opened for.",[14,683,239],{"id":238},[10,685,244,686,688,689,692,693,696,697,200,700,703,704,696,707,710,711,714,715,718,719,722,723,200,726,729],{},[121,687,247],{}," module is the concentration check. Its ",[250,690,691],{},"By Symbol"," tab lists every instrument the account traded with ",[121,694,695],{},"Longs",", ",[121,698,699],{},"Shorts",[121,701,702],{},"Total"," columns, each carrying ",[121,705,706],{},"Trades",[121,708,709],{},"Pips"," and profit, plus ",[121,712,713],{},"Won(%)",". Read the ",[121,716,717],{},"Currency"," column first: several rows sharing USD, all on the same side, is a single dollar position spread across tickers. The ",[250,720,721],{},"Chart"," view plots ",[250,724,725],{},"Trades by Currency Pair",[250,727,728],{},"Profit by Currency Pair",", so concentration in the largest few instruments is visible without reading the table.",[10,731,244,732,738],{},[22,733,735,737],{"href":734},"\u002Fguides\u002Fmagic-numbers-and-strategy-labels",[250,736,252],{}," tab"," does the same for strategies, showing whether one Expert Advisor produced every correlated row or several are colliding on the same currency.",[10,740,741,742,744,745,748,749,751,752,755,756,759,760,763,764,766],{},"In the ",[121,743,295],{},", read the ",[121,746,747],{},"Open Time"," column and look for clusters: several tickets opened within the same minute on different symbols is a correlated entry, not a diversified one. The ",[121,750,266],{}," slideover filters by symbols, magic numbers and ",[121,753,754],{},"Buy (Long)"," \u002F ",[121,757,758],{},"Sell (Short)",", so you can recompute the statistics with one currency group excluded and see how much of the record depended on it. The ",[121,761,762],{},"charts viewer"," ",[250,765,493],{}," view then shows the effect: correlated books fall in one step rather than in several.",[14,768,300],{"id":299},[115,770,771,777,786,796],{},[118,772,773,776],{},[121,774,775],{},"\"A pair is one instrument.\""," It is two currencies. EUR\u002FUSD is a euro position and a dollar position at once, which is why it moves with everything else quoting either.",[118,778,779,782,783,785],{},[121,780,781],{},"\"The coefficient tells me how much to size.\""," It says how two positions move together, not how far. Sizing needs correlation and ",[22,784,638],{"href":637}," together: a tight correlation between two quiet instruments is a small problem.",[118,787,788,791,792,795],{},[121,789,790],{},"\"Correlation is one number per pair.\""," It is one number per pair ",[250,793,794],{},"per window",": two instruments can look unrelated hour to hour and move as one week to week.",[118,797,798,801],{},[121,799,800],{},"\"It only applies to forex majors.\""," Gold, indices and crypto pairs quoted against the dollar belong to the same cluster as EUR\u002FUSD more often than traders expect.",[10,803,804,805,339],{},"For reading concentration through volume rather than through profit, see ",[22,806,808],{"href":807},"\u002Fguides\u002Ftrading-volume-analysis","trading volume analysis",{"title":37,"searchDepth":341,"depth":341,"links":810},[811,812,813,814,815],{"id":16,"depth":341,"text":17},{"id":164,"depth":341,"text":165},{"id":192,"depth":341,"text":193},{"id":238,"depth":341,"text":239},{"id":299,"depth":341,"text":300},"Strategy","Currency pairs that share a currency move together. Correlation measures how tightly, and it is what turns three separate-looking trades into one position.",{},[820,821,358,822],"what-is-correlation-risk","what-is-volatility","what-is-leverage",{"title":576,"description":817},"5.glossary\u002Fwhat-is-forex-pair-correlation","Forex Pair Correlation","DjTTfH0Fxqi8uUIDqE9m2BfJJBAgW-YXUr2gcejQcgo",{"id":828,"title":829,"body":830,"category":348,"date":349,"description":1089,"draft":351,"extension":352,"meta":1090,"navigation":351,"path":179,"related":1091,"seo":1094,"stem":1095,"term":1096,"updated":349,"__hash__":1097},"glossary\u002F5.glossary\u002Fwhat-is-margin-level.md","What Is Margin Level? Formula and Stop Out Levels",{"type":7,"value":831,"toc":1082},[832,835,837,843,846,854,930,933,939,968,970,978,980,992,995,1006,1008,1011,1049,1051,1077],[10,833,834],{},"Margin level is account equity divided by the margin locked up by open positions, expressed as a percentage. It is the number a broker watches to decide whether your positions are still adequately funded; below published thresholds the platform warns you, then closes positions for you.",[14,836,17],{"id":16},[28,838,841],{"className":839,"code":840,"language":33},[31],"Equity       = Balance + floating P&L of open positions\nUsed margin  = Σ (position size × contract size × price) ÷ leverage\nMargin level = (Equity ÷ Used margin) × 100\nFree margin  = Equity − Used margin\n",[35,842,840],{"__ignoreMap":37},[10,844,845],{},"500% means equity is five times the collateral in use; 100% means it exactly equals it. Below that the account is funding positions it can no longer cover.",[10,847,848,849,853],{},"Worked example: a $10,000 account opens 5 lots of EUR\u002FUSD at 1:100 ",[22,850,852],{"href":851},"\u002Fglossary\u002Fwhat-is-leverage","leverage",". Used margin is about $5,400, margin level starts at 185%, and one pip on that size is $50.",[42,855,856,872],{},[45,857,858],{},[48,859,860,863,866,869],{},[51,861,862],{},"Adverse move",[51,864,865],{},"Equity",[51,867,868],{},"Margin level",[51,870,871],{},"Free margin",[61,873,874,888,902,916],{},[48,875,876,879,882,885],{},[66,877,878],{},"0 pips",[66,880,881],{},"$10,000",[66,883,884],{},"185%",[66,886,887],{},"$4,600",[48,889,890,893,896,899],{},[66,891,892],{},"−60 pips",[66,894,895],{},"$7,000",[66,897,898],{},"130%",[66,900,901],{},"$1,600",[48,903,904,907,910,913],{},[66,905,906],{},"−120 pips",[66,908,909],{},"$4,000",[66,911,912],{},"74%",[66,914,915],{},"−$1,400",[48,917,918,921,924,927],{},[66,919,920],{},"−146 pips",[66,922,923],{},"$2,700",[66,925,926],{},"50%",[66,928,929],{},"−$2,700",[10,931,932],{},"A 146-pip move, routine on EUR\u002FUSD in a news week, takes that account from apparently comfortable to liquidated at the broker's thresholds — typically 100% and 50%, but always set in the contract rather than by any universal standard.",[10,934,935,938],{},[121,936,937],{},"Why it collapses fastest when you are already losing."," With size held constant the ratio falls in a straight line, but four things break that assumption at exactly the wrong moment:",[115,940,941,947,953,959],{},[118,942,943,946],{},[121,944,945],{},"The denominator does not shrink with you."," Used margin is frozen at the size you opened, so every dollar of floating loss comes off the numerator alone.",[118,948,949,952],{},[121,950,951],{},"Losing traders add size."," Averaging down, grid and martingale systems open more positions as price moves against them: equity falls while used margin rises, so the ratio drops non-linearly.",[118,954,955,958],{},[121,956,957],{},"Margin requirements rise in volatility."," Brokers cut leverage before major releases and weekends. Used margin increases on positions you never touched, with no price move at all.",[118,960,961,964,965,967],{},[121,962,963],{},"Spreads widen with the loss."," Equity is marked at the price that would close the position, so a ",[22,966,602],{"href":329}," blowout reprices the whole book at once.",[14,969,165],{"id":164},[10,971,972,973,977],{},"Margin level converts an unrealised loss into a forced, realised one at the worst point of the move — the mechanism behind a ",[22,974,976],{"href":975},"\u002Fglossary\u002Fwhat-is-a-margin-call","margin call",". It also reframes sizing: opening a position is choosing how much price movement the account can absorb before someone else takes over the exits, and that buffer, in pips, is knowable before you click.",[14,979,193],{"id":192},[10,981,982,983,227,986,660,988,991],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), the ",[22,984,985],{"href":225},"median deepest drawdown",[121,987,230],{},[121,989,990],{},"17.6% have passed 50%",". These are accounts published here, not traders in general.",[10,993,994],{},"Hold that 50% against the ratio. Margin level scales with equity: an account at a comfortable-looking 200% is already at 100% — the usual call threshold — once equity has halved, and reaching a 50% stop out takes a fall of roughly three quarters. Falls past half are about one published account in six.",[10,996,997,998,1000,1001,1005],{},"The gap between the two published drawdown figures tells the rest. ",[121,999,493],{}," is measured on equity and includes floating losses; ",[121,1002,1003],{},[22,1004,500],{"href":499}," counts closed results only. A first figure far larger than the second means the account carried deep unrealised losses — another way of saying its margin level was low.",[14,1007,239],{"id":238},[10,1009,1010],{},"Used margin is not published, so no account page carries a margin-level gauge. The numerator and the two variables behind the denominator are all visible.",[115,1012,1013,1027,1032,1043],{},[118,1014,1015,200,1018,1020,1021,1023,1024,1026],{},[121,1016,1017],{},"Balance",[121,1019,865],{},", the two rows immediately below ",[121,1022,500],{}," in the ",[121,1025,485],{}," panel, where Equity carries its own percentage in brackets — equity as a share of balance. Well under 100% is an account holding floating losses right now, its margin level falling with them.",[118,1028,244,1029,1031],{},[121,1030,852],{}," badge in the account header, beside the broker and the account currency: it divides the notional value of every position, fixing the denominator before the first order.",[118,1033,244,1034,1039,1040,1042],{},[121,1035,1036],{},[22,1037,1038],{"href":807},"Volume"," column in the ",[121,1041,295],{},", in lots, which is the other half of used margin. Several tickets open at once on large volume means a large denominator against the same equity.",[118,1044,1045,1048],{},[121,1046,1047],{},"Highest $",", the peak balance on the row directly under Equity, showing how far equity now sits below the account's own best.",[14,1050,300],{"id":299},[115,1052,1053,1059,1065,1071],{},[118,1054,1055,1058],{},[121,1056,1057],{},"\"Margin level is my leverage.\""," Related but not the same. Leverage is set per instrument and determines used margin; margin level is a live ratio that changes on every tick.",[118,1060,1061,1064],{},[121,1062,1063],{},"\"1,000% is safe.\""," It is safe for that position set. Open four more of the same size and the same equity covers five times the collateral.",[118,1066,1067,1070],{},[121,1068,1069],{},"\"Free margin is money I can withdraw.\""," It is unencumbered equity, including floating profit that has not been realised and can disappear.",[118,1072,1073,1076],{},[121,1074,1075],{},"\"Closing one position fixes it.\""," Not proportionally. Closing the largest releases the most margin and lifts the ratio fastest; closing the smallest may not lift it above the threshold at all. Which one the platform picks at a stop out is not your choice.",[10,1078,1079,1080,339],{},"For how equity, balance and drawdown read together, see ",[22,1081,555],{"href":554},{"title":37,"searchDepth":341,"depth":341,"links":1083},[1084,1085,1086,1087,1088],{"id":16,"depth":341,"text":17},{"id":164,"depth":341,"text":165},{"id":192,"depth":341,"text":193},{"id":238,"depth":341,"text":239},{"id":299,"depth":341,"text":300},"Margin level is equity divided by used margin, as a percentage. The formula, the margin call and stop out thresholds, and why it falls fastest when you lose.",{},[1092,822,358,1093],"what-is-a-margin-call","what-is-a-daily-drawdown-limit",{"title":829,"description":1089},"5.glossary\u002Fwhat-is-margin-level","Margin Level","Q9Dx6hpaBEKrz852D0ibuqsOObwtB7xfIPla6pe6iSc",{"id":1099,"title":1100,"body":1101,"category":348,"date":349,"description":1291,"draft":565,"extension":352,"meta":1292,"navigation":351,"path":171,"related":1293,"seo":1294,"stem":1295,"term":1296,"updated":349,"__hash__":1297},"glossary\u002F5.glossary\u002Fwhat-is-position-sizing.md","What Is Position Sizing? Formula and Lot Size Calculation",{"type":7,"value":1102,"toc":1284},[1103,1109,1111,1114,1120,1123,1129,1135,1138,1158,1164,1169,1171,1174,1180,1182,1195,1198,1211,1213,1220,1245,1247,1277],[10,1104,1105,1106,1108],{},"Position sizing is the decision of how large a trade to open, derived from how much of the account you are willing to lose if the trade fails. It converts a risk percentage into a lot size using two inputs: the distance to your stop and the value of one pip at that size. It is the single variable that determines an account's ",[22,1107,188],{"href":187}," profile, and it is chosen before the trade rather than discovered after it.",[14,1110,17],{"id":16},[10,1112,1113],{},"Three steps, in order.",[28,1115,1118],{"className":1116,"code":1117,"language":33},[31],"1. Risk amount   = Account balance × Risk %\n2. Pip value     = Contract size × Pip in quote currency × FX rate to account currency\n3. Position size = Risk amount \u002F (Stop distance in pips × Pip value per lot)\n",[35,1119,1117],{"__ignoreMap":37},[10,1121,1122],{},"A worked example on a $10,000 account risking 1% per trade, with a 50-pip stop on EUR\u002FUSD, where one standard lot moves $10 per pip:",[28,1124,1127],{"className":1125,"code":1126,"language":33},[31],"Risk amount   = 10,000 × 0.01      = $100\nPosition size = 100 \u002F (50 × 10)    = 0.20 lots\n",[35,1128,1126],{"__ignoreMap":37},[10,1130,1131,1132,1134],{},"Widen the stop to 100 pips and the same $100 of risk buys 0.10 lots. The risk stays constant; the size adapts. That inversion is the whole idea, and it is why sizing and ",[22,1133,451],{"href":450}," placement cannot be decided separately.",[10,1136,1137],{},"Three methods dominate in practice:",[115,1139,1140,1146,1152],{},[118,1141,1142,1145],{},[121,1143,1144],{},"Fixed lot."," Always 0.10 lots, whatever the stop or the balance. Simple, and the risk per trade drifts constantly as both change.",[118,1147,1148,1151],{},[121,1149,1150],{},"Percentage risk (fixed fractional)."," The formula above. Risk stays proportional, so losses shrink in currency terms as the account falls — the mechanism that makes recovery arithmetically possible.",[118,1153,1154,1157],{},[121,1155,1156],{},"Martingale progression."," Size increases after a loss to recover it. Wins are frequent and small, the equity curve looks immaculate, and the distribution of outcomes has a fat left tail that arrives all at once.",[10,1159,1160],{},[431,1161],{"alt":1162,"src":1163},"Doubling the lot size after every loss against a fixed fraction of equity: same win rate, same market, opposite outcomes","\u002Fimages\u002Farticles\u002Flot-progression.svg",[10,1165,1166],{},[250,1167,1168],{},"Which one an account uses is readable from the lot sizes alone.",[14,1170,165],{"id":164},[10,1172,1173],{},"Entries decide whether you win. Sizing decides whether you are still there for the next one. Two traders taking identical signals with identical stops produce identical win rates and completely different accounts, because one risked 0.5% and the other risked 8%.",[10,1175,1176,1177,1179],{},"Sizing is also where ",[22,1178,852],{"href":851}," does its actual damage. High leverage is not itself risk — it is permission to take risk. The risk arrives when that permission is used to open a size whose stop distance implies a loss the account cannot absorb twice in a row.",[14,1181,193],{"id":192},[10,1183,1184,1185,1187,1188,1191,1192,1194],{},"Sizing leaves its signature in the drawdown tail. Across the accounts published on ShowMyTrades that have trading history (August 2026) — accounts published here, not traders in general — ",[121,1186,663],{}," have been ",[22,1189,1190],{"href":225},"more than 20% underwater"," at some point and ",[121,1193,667],{}," have lost more than half their peak value.",[10,1196,1197],{},"A properly sized fixed-fractional account rarely reaches that last band. Losing 50% at 1% risk per trade requires roughly 69 consecutive losses. Accounts in that tail generally arrived another way: escalating size after losses, or a size chosen without reference to the stop at all.",[10,1199,1200,1201,470,1203,1206,1207,1210],{},"Context for who is doing the sizing: the median autotrading share on these accounts is ",[121,1202,207],{},[121,1204,1205],{},"53.9%"," run above 90% automated, against ",[121,1208,1209],{},"42.2%"," under 10%. On more than half of the published set, position size is a line in an EA's settings — configured once and never revisited as the balance moves.",[14,1212,239],{"id":238},[10,1214,244,1215,1219],{},[22,1216,1218],{"href":1217},"\u002Ftools\u002Fposition-size-calculator","position size calculator"," runs the formula above with live prices, in your account currency, for percentage or fixed-amount risk and for stops expressed in price or pips.",[10,1221,1222,1223,1225,1226,1228,1229,1231,1232,1235,1236,1023,1241,1244],{},"On a published account page you can audit sizing rather than assume it. The ",[121,1224,295],{}," carries a ",[121,1227,1038],{}," column showing the lot size of every individual trade, so a size that steps up after each loser is visible directly. ",[121,1230,266],{}," adds a ",[121,1233,1234],{},"Lot Size"," min\u002Fmax filter: set a floor above the account's normal size and see whether the surviving trades cluster immediately after losses, which is the martingale signature. ",[121,1237,1238],{},[22,1239,1240],{"href":807},"Total Lots",[121,1242,1243],{},"Advanced Statistics"," module gives the aggregate; across published accounts it stands at 1,724,575 lots traded.",[14,1246,300],{"id":299},[115,1248,1249,1255,1265,1271],{},[118,1250,1251,1254],{},[121,1252,1253],{},"\"Risking 2% means using 2% of my account.\""," No. 2% is the loss if the stop is hit. The margin the position occupies is a separate figure entirely, set by leverage.",[118,1256,1257,1260,1261,1264],{},[121,1258,1259],{},"\"I risk 1% per trade, so my worst case is 1%.\""," Only with one position open. ",[22,1262,1263],{"href":354},"Five correlated positions"," at 1% each are one 5% trade wearing a disguise, and correlated pairs move together precisely when it hurts.",[118,1266,1267,1270],{},[121,1268,1269],{},"\"No stop loss, so no risk to calculate.\""," Without a stop, the position size formula has no denominator — the risk is not small, it is undefined, and its true value is the margin call.",[118,1272,1273,1276],{},[121,1274,1275],{},"\"Compounding means scaling up.\""," Fixed-fractional sizing scales both ways. Increasing lots after wins while holding them constant after losses is not compounding; it is a slow ratchet toward a drawdown you never sized for.",[10,1278,1279,1280,339],{},"For the full set of risk and sizing tools and when each one applies, see ",[22,1281,1283],{"href":1282},"\u002Fguides\u002Fforex-calculators-guide","the forex calculators guide",{"title":37,"searchDepth":341,"depth":341,"links":1285},[1286,1287,1288,1289,1290],{"id":16,"depth":341,"text":17},{"id":164,"depth":341,"text":165},{"id":192,"depth":341,"text":193},{"id":238,"depth":341,"text":239},{"id":299,"depth":341,"text":300},"Position sizing turns a risk percentage into a lot size using your stop distance and pip value. The formula, the three common methods, and what bad sizing costs.",{},[357,568,569,822],{"title":1100,"description":1291},"5.glossary\u002Fwhat-is-position-sizing","Position Sizing","qP5mfGAxSuWSiccKuy0i_N8LQtpN2UHwOG-ZOVxOViU",1787415695541]