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Exposure definition
Exposure is the amount of financial risk tied to an open trade, asset, currency, sector, or portfolio. It measures how much price movement can affect you.
Exposure can be measured by position value, by percentage of the account, or by asset class, currency, or region. Holding several positions in the same market gives you concentrated exposure, which raises risk if that market moves sharply against you.
Exposure is the size of the risk; leverage is what lets a small amount of capital control a larger exposure. You lower exposure to cap potential loss and raise it to chase larger gains, and you reach zero exposure in a market only when you are flat, with no open position in it.
Exposure Example
You hold a USD 10,000 portfolio.
You hold USD 2,000 worth of Apple shares.
Your exposure to Apple is 20%, because:
USD 2,000 √∑ USD 10,000 √ó 100 = 20%
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