Risk Sentiment: readthe mood of the market.
A risk on risk off indicator tells you the mood of the market: are investors chasing returns, or are they running for safety? The Risk Sentiment tool turns that mood into 1 reading, from risk-off to risk-on, and shows how the key assets confirm it.
It matters for currencies because the mood decides which currencies are in demand: the Aussie and the Kiwi in good times, the yen and the franc in bad ones.
What it shows
A gauge from risk-off to risk-on, for example risk-on 64, and the assets behind it: stocks, commodity currencies, safe havens and gold. When they all point the same way, the mood is clear.
How to read it
Look at the direction as much as the level. A reading moving from 70 toward 50 tells you the good mood is fading, even if it is still risk-on. That is often the first warning before a bigger shift.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
Your AUDUSD long fits a risk-on reading of 64 with stocks rising. The mood is on your side.
The reading drops from 68 to 52 in 2 sessions. You tighten your AUD and NZD plans and look at the yen.
Mistakes to avoid
- Ignoring the mood because your pair has a strong chart.
- Treating 1 red day in stocks as risk-off.
- Forgetting that risk mood can override rate spreads for a while.
What makes it different
The reading sits next to the bias and the headlines, so you see the mood and the reason for it in 1 place.
Questions
Which currencies are risk-on?
Usually AUD, NZD and CAD. The yen and the franc tend to do well in risk-off.
How often does it update?
Through the trading day as markets move.
Is risk-on always bullish for stocks?
Mostly, but always check it against the headlines.