Spreading risk

Summary

Several positions that all move together are really one big position. Five different coins that all follow Bitcoin do not spread risk much. Spreading risk means holding things that do not all react to the same news in the same way, and keeping the total of all open risks within the limit you set for yourself.

Key points

• Positions that move together act like one big position.
• Real spreading means things that react differently to the same news.
• Add up the risk of all open positions, not just each one.

Check yourself

You hold five coins that all closely follow Bitcoin. Is your risk well spread?

Practice