Exposure

Percentage of candles with an open position -- what it tells you about capital utilization and idle time.

What is Exposure?

Exposure tells you what percentage of the backtest period your strategy had an open position. Think of it as measuring how much time your strategy spent "in the game" versus sitting on the sidelines.

An exposure of 100% means your strategy was always holding a position. An exposure of 30% means it was in the market for about a third of the time and had no position for the rest. Most backtested strategies have exposure well below 100%, because they wait for specific conditions before entering a trade.

Why Exposure Matters

Exposure is the key to understanding several other metrics. Metrics like alpha and beta are calculated across every candle in the backtest, including candles where your strategy has no position and returns 0%. These flat candles pull those metrics toward zero. If your strategy's alpha or beta seems surprisingly low, checking exposure is the first step to understanding why.

Why is my beta so much lower than 1 when my trades track the asset closely?

If your exposure is 40%, your strategy returns 0% on 60% of the candles. Since beta is calculated across all candles, those flat candles drag it down. Your beta will be in a similar range to your exposure when your trades closely follow the asset.

How It's Calculated

Simula counts how many candles had an open position and divides by the total number of candles in the backtest:

Exposure

exposure = (candles with an open position / total candles) * 100

The result is a percentage from 0% to 100%. A candle counts as having an open position if the strategy held a trade at any point during that candle.

Worked Examples

Moderate exposure

A strategy runs over 100 candles and makes 3 trades:

Trade 1: 20 candles
Trade 2: 25 candles
Trade 3: 15 candles

Total candles with a position = 20 + 25 + 15 = 60. Exposure = 60 / 100 = 60%.

Low exposure

A strategy runs over 500 candles but only makes 2 short trades:

Trade 1: 10 candles
Trade 2: 15 candles

Total candles with a position = 25. Exposure = 25 / 500 = 5%. The strategy had no position for 95% of the backtest.

Reading Your Results

Exposure near 100%

Your strategy is almost always holding a position. This is typical of buy-and-hold or always-in-the-market strategies.

Exposure between 30% and 70%

Your strategy spends a significant amount of time both in and out of the market. This is common for strategies that wait for specific entry signals.

Exposure below 30%

Your strategy is selective and spends most of its time without a position. The entry conditions are strict or the trades are short relative to the total backtest period.

Exposure at 0%

Your strategy didn't open any positions during the backtest. This usually means the entry conditions were never met.

Things to Watch Out For

Exposure affects how you read other metrics

A strategy with 20% exposure and 15% annualized return is using only a fifth of the available time to generate that return. Meanwhile, a strategy with 90% exposure and the same 15% return is deployed nearly all the time to achieve the same result. Exposure gives you context for interpreting return figures.

Exposure is not the same as beta

Beta and exposure are related but measure different things. Exposure counts the fraction of candles with an open position. Beta measures the statistical relationship between your strategy's returns and the asset's returns. They will be in a similar range for strategies that closely track the asset when positioned, but they can diverge -- for example, if the strategy uses leverage or trades against the trend.

Timeframe affects exposure

The same strategy logic can produce different exposure percentages on different timeframes. On a 1-minute chart, a trade lasting 1 hour covers 60 candles. On a 1-hour chart, the same trade covers 1 candle. More candles in the backtest with the same number of trades will generally result in lower exposure.

Alpha -- calculated across all candles including flat periods. Exposure helps explain why alpha may look different than you expect.

Beta -- also calculated across all candles. Exposure and beta are often in a similar range for strategies that track the asset when positioned.

Average Holding Period -- measures how long each individual trade lasts. A short holding period with many trades can still produce high exposure if the strategy re-enters quickly.

Win Rate and Expectancy -- tells you what happens during the time your strategy is exposed. Exposure tells you how much of the time that is.