In backtesting, exposure refers to the amount of capital that is actively at risk in the market, relative to total capital. It can be thought of as the percentage of the account invested or the portion of time the strategy has positions open. Monitoring exposure helps ensure the strategy isn’t over-leveraged at any given time. For example, an exposure of 50% might mean roughly half the account is typically in use for positions. High exposure, especially with high leverage, can increase risk, so traders watch this to maintain a balanced approach.

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