In trading, exposure is a general term that can mean three things:
- the total market value of your trades at open
- the total amount of possible risk at any given point
- the portion of a fund invested in a particular market or asset
In share dealing, your exposure would be equal to the total amount you had spent on opening positions. So if you bought $500 of Coca Cola shares, then the total amount you can lose on your trade is $500, if Coca Cola shares become worthless.
Leveraged trading works differently. Your exposure can be amplified considerably beyond your initial outlay, known as your margin. Some trades, for example, will only require a 10% margin and as such will be exposed 90% beyond the amount you deposit. In these cases, profit can be multiplied but losses can exceed initial deposits.
Finally, market exposure can refer to the portion of a fund or portfolio that is invested in a particular sector or asset. A £10,000 portfolio that has £3,000 invested in gold, for example, would have 30% market exposure to gold.