Portfolio Heat Calculator: Total Open Risk Across Trades
Portfolio heat is the percentage of account equity represented by the planned losses of every position that could be open together. Add each long or short position's stop-distance loss, round-trip fees, and modeled exit slippage before accepting another trade. If the total exceeds the account-level cap in your written plan, pause the order and reduce or remove risk; do not widen stops merely to make the number fit. This worksheet updates immediately when direction, entry, stop, shares, costs, equity, or the user's own cap changes. It is an educational planning model—not a forecast, a safe-percentage recommendation, or a guarantee that a stop will fill.
Portfolio Heat Calculator
Replace the example with one consistent account scope and every position that could be open at the same time. The 2% cap below demonstrates the arithmetic only; it is not a StockWin recommendation.
Do not add another account or unused borrowing capacity.
Enter the limit from your own written process; no percentage is universally safe.
Field order per row: direction, entry, stop, shares, total round-trip fees, extra exit slippage per share, optional name. Leave entry, stop, and shares blank to exclude a row.
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| Position | Direction | Stop distance | Price risk | Fees + slippage | Planned loss | Equity % |
|---|
Model boundary: planned loss is not a guaranteed maximum. Gaps, halts, thin markets, rejected orders, margin liquidation, borrow rules, or unavailable order types can produce a worse result. This worksheet does not retrieve positions, quotes, correlation, taxes, buying power, or broker rules.
What portfolio heat answers—and what it does not
For this worksheet, portfolio heat equals the sum of modeled planned losses divided by account equity. It answers one decision question: if every listed position reaches its entered stop under the entered cost assumptions, what percentage of this account is represented by those losses?
Portfolio heat (%) = total planned loss ÷ account equity × 100
The absolute distance works for both directions, but validation differs: a long stop must be below entry and a short stop above entry. Switching Long/Short therefore updates immediately and can stop the calculation instead of silently returning a misleading positive number.
CME Group's trade-plan risk lesson asks traders to define risk per trade, simultaneous positions, and maximum account exposure. Its position-size lesson starts with a stop location and an account dollar or percentage risk. These are planning concepts—not a regulatory safe percentage or proof that a stop will fill.
| Tool | Decision | Inputs | Do not infer |
|---|---|---|---|
| Position Size Calculator | How many shares fit one trade? | Equity, risk, entry, stop, costs | It does not total several positions. |
| Portfolio Heat Calculator | How much planned loss exists across simultaneous positions? | Every row plus one equity scope and cap | It does not estimate correlation or probability. |
| Drawdown Calculator | What did losses do to equity and recovery arithmetic? | Peak, equity, loss sequence | It does not measure current open risk. |
| Risk-Reward Calculator | What payoff and break-even rate follow? | Entry, stop, target, costs | A good ratio does not approve combined exposure. |
Five checks before adding one more position
1. Freeze the account scope
Use the account whose loss budget governs the decision and one consistent current-equity definition. Do not add expected profit, another account, or unused buying power just to raise the denominator. Record whether the rule uses broker equity, settled capital, or a strategy allocation.
2. Use executable invalidation levels
Enter the actual or planned entry and the price that invalidates the trade. Choosing shares first and moving a stop afterward changes risk invisibly. Use the single-trade sizing tool first when quantity is not defined.
3. Include positions that can coexist
Do not omit a profitable position merely because it has an unrealized gain. Include pending orders if they could fill before cancellation is confirmed. Verify contingent-order behavior with the broker rather than assuming two orders cannot coexist.
4. Include execution costs
Fees are entered once per row; slippage is extra loss per share beyond the stop-price arithmetic. FINRA's day-trading disclosure notes that commissions add to losses, volatile or halted markets can prevent liquidation at a reasonable price, and margin or shorts can produce losses beyond the initial investment. The result is therefore “planned loss,” not maximum loss.
5. Inspect what the sum hides
The cap is user-defined because a percentage copied from an article is not a personal risk policy. FINRA's diversification guide explains concentration risk, while Investor.gov cautions that narrowly focused funds may not diversify. Five ticker symbols are not automatically five independent risks.
Pause before the order when:
- A long stop is at/above entry or a short stop at/below entry.
- The cap is exceeded after costs and slippage.
- A position was omitted because losses “probably will not happen together.”
- Several holdings share an index, sector, issuer, factor, currency, duration, commodity, or event exposure that has not been reviewed.
- A stop is assumed to guarantee price during a gap or halt.
- Margin, short borrowing, options, futures, or broker liquidation rules make the share model incomplete.
- The only way to pass is to widen stops, ignore costs, count hoped-for profit, or change the denominator.
Use the status as an action—not a grade
| Status | Trigger | Immediate action | Do not conclude |
|---|---|---|---|
| Pause: invalid | Missing fields, negative costs, wrong-side stop | Correct every row. | Do not use a partial total. |
| Pause: cap exceeded | Total exceeds entered budget | Reduce/remove risk or cancel the new order. | Do not move stops just to pass. |
| Verify | 80% or more of cap used | Check shared exposure, gaps, liquidity, and broker terms. | Unused arithmetic capacity is not automatically deployable. |
| Within entered cap | Below 80% of entered cap | Confirm the list and hidden shared risk. | This is not a buy signal or safe-trade label. |
Worked examples
| Scenario | Arithmetic | Result | Decision |
|---|---|---|---|
| Loaded three-position example | $407 + $411 + $307 on $100,000 | $1,125; 1.125% heat; $875 under the example 2% cap | Within the entered cap; still inspect shared risk. |
| Add $1,000 planned loss | $1,125 + $1,000 | $2,125; 2.125% heat | Pause: exceeds the entered $2,000 budget by $125. |
| Same risks, equity $50,000 | $1,125 ÷ $50,000 | 2.25% heat | Pause under the same example cap; resize from current equity. |
| Switch Trade B to Long but leave stop $52 above entry $50 | Wrong-side stop | Validation error | Pause and correct direction/stop. |
A drawdown can make unchanged dollar positions larger as a percentage of equity. After consecutive losses, use the drawdown and recovery tool, then recompute position size and portfolio heat from updated equity.
Limits: correlation, gaps, and leverage
This sum is not value at risk, expected shortfall, a margin model, beta-weighted exposure, or option Greeks. It does not estimate the probability losses occur together or how correlations change in stress. Shorts can face borrow costs, buy-ins, recalls, and theoretically unbounded price risk. Options are nonlinear; futures use multipliers and variation margin; leveraged products can be path-dependent. Use instrument-specific models and current broker documents.
Return to the Risk Management Decision Hub for the next diagnostic. Check payoff only after size and combined risk with the risk-reward tool. Review closed-trade evidence with the expectancy calculator; it does not approve open risk. Test open-position exits with the Trailing Stop Calculator, remembering that a trigger does not guarantee a fill.
Record the evidence
- Timestamp and one equity definition.
- Every open and simultaneously fillable pending position.
- Direction, entry, stop/invalidation, shares, fees, and slippage basis.
- Total planned loss, heat, entered cap, and unused budget.
- Shared sector, index, factor, issuer, currency, event, or duration exposure.
- Broker terms that can alter exits, borrowing, or liquidation.
- The action: submit, reduce, cancel, verify, or pause.
Save per-position inputs beside confirmations. If realized loss differs, a later review can separate a calculation error, changed position, gap, execution slippage, or a rule that was not followed.
Primary sources and further reading
- CME Group: Risk Management and Your Trade Plan
- CME Group: Proper Position Size
- FINRA: Asset Allocation and Diversification
- Investor.gov: Asset Allocation and Diversification
- FINRA Rule 2270: Day-Trading Risk Disclosure
Frequently asked questions
What is portfolio heat?
Here it is the sum of planned losses across entered positions divided by account equity. Planned loss includes stop distance, entered fees, and modeled exit slippage; it is not a guaranteed maximum.
Should longs and shorts offset?
Not automatically. Opposite directions can retain basis, timing, factor, gap, borrow, and execution risk. This calculator adds losses rather than assuming an unverified hedge.
What percentage is safe?
This page supplies no universal safe percentage. The applicable rule depends on the account, instruments, leverage, liquidity, holding period, gap risk, objectives, and loss tolerance.
Does a stop guarantee the loss?
No. Gaps, halts, liquidity, order handling, slippage, and broker rules can cause a worse price or prevent the expected exit.
Why can heat rise after losses?
The same dollar loss is a larger percentage of lower equity. Recalculate after drawdown instead of carrying forward an old size.
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