Exchange rate risk is the effect of the continuous shift in the worldwide
market supply and demand balance on an outstanding foreign exchange position.
For the period it is outstanding, the position will be subject to all the price changes.
The most popular measures to cut losses short and ride profitable positions that losses should be kept
within manageable limits are the position limit and the loss limit.
By the position limitation a maximum
amount of a certain currency a trader is allowed to carry at any single time during the regular trading hours is to be established. The loss limit is a measure designed to avoid unsustainable losses made by traders by
means of stop-loss levels setting.
