The term "overexposure" in trading refers to the mistake of taking on too much risk. It usually occurs when a trader makes the technical error of putting too much capital into a single position or market.
While the right amount of exposure allows for greater profit from a position, overexposure puts your capital at risk.

Overexposure can occur for a variety of reasons.

For starters, if a trader believes that a position has a high-profit potential, they may put too much money into it.

Second, a trader may be considered overexposed if they have too many positions open in the same market or industry. Traders can avoid this risk by balancing their portfolios across positions, markets, and industries.
All trading involves risk, but being overexposed can increase the likelihood of suffering significant losses, even if risk management measures are in place. To avoid overexposure, it is critical to take the time to navigate your chosen market and avoid putting all of your eggs in one basket.

Overexposure in trading occurs when an investor allocates too much capital to a single trade, asset, or market sector, increasing the risk of substantial losses. This can result from excessive confidence, inadequate diversification, or failure to adhere to risk management principles. Overexposure leaves a trader vulnerable to significant market fluctuations, where adverse price movements can lead to disproportionate losses, impacting the overall portfolio's performance. To mitigate overexposure, traders should diversify their investments, set strict position size limits, and use stop-loss orders. Effective risk management involves regularly reassessing exposure levels to ensure alignment with the trader's risk tolerance and investment objectives, thereby maintaining a balanced and resilient portfolio.