When I see that a weak currency gets too strong, I abort all the positions in that currency. It usually happens before my stops are hit, so I rarely lose 1R in each of them, it's usually a fraction of that. Unless it happens, when I'm asleep - then I get smashed. :( It happened to me with NZD on Oct 23rd, as there was an unfavorable news announcement at 3 am. Today I aborted all my postitions in GBP (I was long) and then in CHF and EUR (I was short) and it also cost me a good chunk of my capital, so I guess some limit here might be a good idea. However, I find aborting the losing positions (and taking the losses) an element of a sound trading strategy.
Anyway, thanks for turning my attention to this question.
But this a tricky issue; not just for positions with a common currency in the pair, but also because some ccys may be correlated. (I don't like to say 'are correlated' because the correlations change...) I think there's a case for avoiding multiple positions with a common currency; why not just trade the pair where the 2nd ccy looks weakest/strongest?
You're right about correlations. Most of the time EUR is correlated with CHF, AUD with NZD, USD with CAD. GBP and JPY tend go their own way. But there are times when they go uncoupled. However, you're right that, if you can see them go in lockstep, it's enough to stick with just one of them, so your overall risk is smaller in case of a sudden shift of sentiment.
(As for my background, just so I'm not a grey face to you, I wrote my master's thesis in 1998 on forecasting the currencies' exchange rates, then I worked in HQ of a small bank, in charge of managing the currency position of our business. So I see your point and risk management is at the heart of my small trading business. :))