Definition – What does Unsystematic Risk mean?
Unsystematic risk refers to a risk that affects a particular currency pair or set of currency pairs rather than the forex market in general. It is important for a forex trader to identify any recurring unsystematic risks that impact a currency pair he trades, just as it is important to know the specific economic reports that move a currency pair.
ForexTerms explains Unsystematic Risk
An example of an unsystematic risk would be a breakdown in trade relations between two nations, a natural disaster affecting one region or any other localized news or economic event that negatively impacts a currency pair. A trader can minimize unsystematic risk by diversifying across other currency pairs, but over-diversifying can be as damaging to a trading strategy as unsystematic risk if the trader’s focus is pulled in too many ways.