Two markets are correlated when they tend to move together (positive) or in opposite directions (negative). If you hold several correlated positions, a single move can hit all of them at once. Your real risk is the sum, not the risk of each trade.
Common correlations
- EURUSD and GBPUSD: often move in the same direction.
- EURUSD and USDCAD: often move in opposite directions (both against the dollar, but the dollar is on different sides).
- Nasdaq, S&P 500 and US30: strongly positive.
- Bitcoin and the main altcoins: strongly positive.
- Gold and the dollar: often negative.
Why it matters in a challenge
Three correlated positions at 0.7% risk each behave like one 2.1% trade. If they all stop out together, half of a 4% daily limit is gone in one move.
A simple rule
- Maximum total open risk at any moment: for example 1.5% of the account.
- Count correlated positions in the same direction as one, and split the risk between them.
- Prefer the cleanest setup among correlated markets instead of taking all of them.