Hidden correlation inside a pile of scalps

[Fairman]

Hidden correlation inside a pile of scalps

Three scalps open at the same time: long EURUSD, long GBPUSD, short USDCHF. They look like three separate ideas. They are one idea, short dollar, taken three times.

When the dollar jumps, all three go wrong together. The planned loss per trade is multiplied, and the combined drawdown is much larger than any single stop suggests.

Correlation between majors shifts over time and spikes in stressful moments. Pairs that seem unrelated in a calm market can move in lockstep during a news event.

A quick check is to list all open positions and convert each to net exposure by currency. If the total exposure to one currency is much larger than intended, the portfolio is concentrated.

Many scalping platforms do not show this directly. A simple spreadsheet or a small script that adds up currency exposures does the job.

Has an exposure check ever revealed that three apparently separate trades were really a single bet?