Defining Overall Risk
There are many ways to examine risk along with a variety of methods to manage it. A top-down portfolio risk overlay is critical in maintaining balance and a proper degree of diversity, which helps limit your total risk.
I like to look at risk across a broad spectrum so that I’m considering different measures of risk related to individual positions within a certain sector and positions within an overall portfolio.
Because this book is focused on trading the bullion markets from my personal perspective, a discussion of risk analysis must begin at the top-down portfolio level.
Let’s break it down.