What is overexposure?

Overexposure is when a trader has invested too much into one asset. This is potentially bad for a trader’s profitability because if their chosen asset decreases in price then their entire portfolio is down. Spreading investments over a number of different assets helps to decrease the risk of being overexposed to a particular asset, this is known as diversification. 

Avoiding overexposure is a key part of risk management and is generally used by experienced traders to increase profitability.