Economics

What Is Overexposure?

Jesse
1 mn

Overexposure in trading refers to a trader exposing oneself to too much risk, essentially investing too much in one asset. Should the asset not perform well, the trader is then entirely exposed to the losses and their entire portfolio goes down. 

Traders can combat overexposure through diversification - investing in a number of assets. This helps to decrease the risks involved. Avoiding overexposure plays a large and vital role in risk management.