Bankroll management tells you how much to stake on a single trade. Risk management is the bigger picture: the set of habits that ensures no combination of trades, and no run of bad luck, can wipe you out. It is what separates traders who last from those who have one good month and then disappear.
Beyond position sizing
Sizing each position sensibly is necessary but not sufficient. You also have to manage how your positions interact, how concentrated your risk is, and how you behave in a drawdown. A portfolio of individually well-sized trades can still be dangerous if they are all secretly the same bet, or if a losing streak pushes you into chasing losses.
Correlation is the hidden danger
The most common mistake is treating correlated positions as independent. Three markets that all depend on the same election outcome are, in risk terms, one big bet — if it goes wrong, all three lose together. Before adding a position, ask whether it is genuinely independent of what you already hold. If it is not, size the whole cluster as a single exposure, not as separate trades.
Diversification
The flip side is diversification: spreading your capital across genuinely uncorrelated markets — different events, categories and time horizons — so that no single outcome dominates your results. Diversification does not raise your edge, but it smooths your returns and dramatically lowers the chance that one bad event does serious damage.
Drawdown and the math of ruin
Losing streaks are inevitable, even with a real edge. Plan for them: set a maximum total exposure, cap how much of your bankroll can be at risk at once, and never try to win it back faster after a loss by sizing up — that is how accounts blow up. The bankroll calculator shows how many flat losses it takes to halve your bankroll at a given size, a useful reality check. Above all, avoid the classic mistakes that turn a manageable drawdown into ruin.
Related strategies
Build on this approach with the adjacent playbooks:
Frequently asked questions
What is the difference between risk management and bankroll management?
Bankroll management is how much to stake on each trade; risk management is the wider framework — managing correlation between positions, diversifying across uncorrelated markets, and setting drawdown limits — that keeps your whole book safe.
Why does correlation matter in prediction markets?
Because positions that depend on the same underlying event are really one bet. If you hold several correlated markets and the event goes against you, they all lose together, so your true risk is far higher than the individual position sizes suggest.
How do I survive a losing streak?
Expect them, set a maximum total exposure, keep individual positions small, and never increase your size to win losses back faster. Diversifying across uncorrelated markets and sticking to your rules are what get you through.