The total value of your open positions in the market. Also refers to how much risk you have to a particular currency, sector, or direction.
What Is Exposure in Forex?
Exposure is the total amount of money at risk through your open positions. If you have a 1 standard Lot EUR/USD position, your exposure is approximately $100,000 (the Contract Size). If you also have 2 mini lots of GBP/USD, your total market exposure is about $120,000.
Types of Exposure
Directional exposure: How much you stand to gain or lose from a particular market direction. If you are long EUR/USD and long GBP/USD, both positions lose if the US dollar strengthens, so your USD exposure is amplified.
Currency exposure: Your net position in a specific currency across all trades. If you are long EUR/USD and short EUR/GBP, your EUR exposure partially offsets itself. Tracking per-currency exposure helps identify hidden correlations in your portfolio.
Managing Exposure
Professional risk management involves monitoring exposure relative to your account size. As a general guideline, total open exposure should not exceed 3-5 times your account Account Equity, even though your Leverage might allow much more. Over-exposure is one of the most common reasons traders blow their accounts. Our Position Size Calculator helps you size each trade appropriately.
Related Terms
Position Sizing
The process of determining how many lots or units to trade based on your account size, risk tolerance, and stop-loss distance. Proper position sizing ensures no single trade can cause catastrophic damage to your account.
Leverage
A mechanism that allows you to control a position larger than your deposit. Expressed as a ratio like 1:30, meaning $1 controls $30 in currency.
Margin
The deposit required to open and maintain a leveraged position. Margin is not a fee. It is collateral held by the broker while your trade is open.
Risk-Reward Ratio
The relationship between how much you risk on a trade and how much you stand to gain. A 1:2 risk-reward ratio means you risk $1 to potentially make $2.
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