Risk on, risk off:the mood behind moves.
Risk on risk off explained in 1 sentence: when investors feel good, they buy riskier assets, and when they are scared, they run to safety. That mood moves whole groups of markets together.
For currency traders, it decides which currencies are in demand.
Risk-on
Stocks rise, commodity currencies like the Aussie, Kiwi and Loonie strengthen, and safe havens like the yen and the franc weaken.
Risk-off
Stocks fall, commodity currencies weaken, and money moves into the yen, the franc and government bonds. The dollar often gains too.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
Risk-on and your bias is long AUDJPY. Both the mood and the macro story agree.
Your AUD long has a good rate story, but the mood turns risk-off. The mood usually wins in the short term.
Mistakes to avoid
- Ignoring risk mood during big news days.
- Calling risk-off after 1 red candle.
- Forgetting that the dollar can be both a safe haven and a risk currency.
What makes it different
The Risk Sentiment tool turns the mood into 1 reading next to your bias.
Questions
Is gold risk-off?
Often, but it also reacts to yields and the dollar.
Which pair shows risk mood best?
AUDJPY is a classic barometer.
How fast can the mood change?
Within hours on big headlines.