In trading and investment, exposure refers to the degree of risk an investor has in a particular asset or market. In other words, it is the amount of money that is subject to potential loss due to market volatility, unfavourable price movements, or other types of risk.
Exposure can also refer to the total value of an investor’s holdings in a particular asset or market, which is the total size of their positions. For example, an investor who purchases a significant number of shares of a company is said to have a large exposure to that stock.
With greater exposure to the market comes greater risk of substantial losses should market prices fluctuate. There are several risk management techniques investors can implement to manage their exposure in the market. They include portfolio diversification, the use of stop-loss orders, hedging, and staying up to date with market developments.
Diversification: Investors can diversify their portfolio by investing in a variety of assets across sectors and asset classes to reduce the impact of any single asset performing adversely. This limits their exposure to any single market, which can help spread their risk of investing.
Using stop-loss orders: A stop-loss order is an instruction to automatically sell an asset when it reaches a certain price level. Investors who set stop-loss orders can help limit potential losses.
Hedging: Hedging is the process in which an investor takes a position in the market that correlates negatively with an existing position. This can help offset the risk in the existing position.
Staying up to date with market developments: Keeping up with market developments such as economic and political developments around the world can help investors identify trading opportunities and potential risks.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.