What does 'risk ON risk OFF' mean?

[rodolfo49]

I just heard a guy(while analyzing some charts) say "concerning risk ON risk OFF charts..." and the other day I asked a friend what was his trading strategy and amongst using some indicators, he also mentioned checking the "risk ON risk OFF".


Can someone please explain this in a simple way? :whistling

 

[econohedge]

I just heard a guy(while analyzing some charts) say "concerning risk ON risk OFF charts..." and the other day I asked a friend what was his trading strategy and amongst using some indicators, he also mentioned checking the "risk ON risk OFF".


Can someone please explain this in a simple way? :whistling

as i understand means that a risk on strategy is one that the investor prefers risky assets than safer. The opposite with risk off trades.

Also can be used in definition of the status of the market, for example, if risky assets are increasing in prices then can be considered a risk on mood of the market.

 

[new_trader]

I just heard a guy(while analyzing some charts) say "concerning risk ON risk OFF charts..." and the other day I asked a friend what was his trading strategy and amongst using some indicators, he also mentioned checking the "risk ON risk OFF".


Can someone please explain this in a simple way? :whistling

In the mainstream media world the definition is:
US treasuries and US dollar (Cash) are risk off
Stocks and Commodities are risk on.

Investors and traders move money from one to the other depending on sentiment, uncertainty etc.

 

[rodolfo49]

I think I get it now. Like when investors take money out from the stock market and take it to the bond market for safety, that means the market is feeling less apetite for risk. I understand now.

Is there a way to check this everyday for daytrading purposes?

 

[rodolfo49]

Thx econohedge and new_trader!

 

[new_trader]

I think I get it now. Like when investors take money out from the stock market and take it to the bond market for safety, that means the market is feeling less apetite for risk. I understand now.

Is there a way to check this everyday for daytrading purposes?

Check the yields on the 2 & 10 year US Government bonds, but I don’t think they give you any leading indication of what will happen. All you will see is the risk on/off correlation with stocks and commodities.

 

[wackypete2]

Risk on/off is nothing more than a fancy way of saying price of certain instruments is moving up or down. IMO it has very little to do with fundamentals or actual trading for day traders.

Peter

 

[new_trader]

Risk on/off is nothing more than a fancy way of saying price of certain instruments is moving up or down. IMO it has very little to do with fundamentals or actual trading for day traders.

Peter

Yes & No. US Treasuries are seen as a safe haven because everyone believes the US government will never default...they can, after all, create money out of thin air and pay off bond holders. The loss of nominal value is considered a bigger risk than the loss of purchasing power.

 

[DionysusToast]

It's just a fancy pair of buzzwords that have gained footing in the media of late.

Makes people sound smarter, apparently.

If you can't blind them with science - baffle them with bu11sh1t.

 

[ChocolateDigestive]

actually an overview appraisal of risk on risk off metrics can give a powerful guide to intraday flow. don't underestimate it. I wont say any more than that.

 

[Enzzo]

he also mentioned checking the "risk ON risk OFF".

It can be used, of course in day trading.... it would be like for examplpe:
Imagine you trade the EURUSD, and you see a possible bearish setup forming..... then you also realize that the SP500 is going up, the German Bunds going down, Cable down, EURJPY down, etc..... you maybe want to give a pass to that bearish pattern, because of the correlation between markets, and in this case, because of the general RISK ON.....

check this is not that hard.. if you don't want to have lots of charts open, because you don't trade them all, just put an index chart (SP500, Dow....) and the German Bunds one, for example, together.... of course, they trade very much inversely correlated.... so Indexes up and Bunds down should read RISK appetite ON, and vice verse

Hope it helps you a bit

 

[NVP]

Risk on/off is nothing more than a fancy way of saying price of certain instruments is moving up or down. IMO it has very little to do with fundamentals or actual trading for day traders.

Peter

.....and the picture is gradually blurring so they will have to think up a new word soon ...........

N

 

[NVP]

I just heard a guy(while analyzing some charts) say "concerning risk ON risk OFF charts..." and the other day I asked a friend what was his trading strategy and amongst using some indicators, he also mentioned checking the "risk ON risk OFF".


Can someone please explain this in a simple way? :whistling

risk on and risk off are below

left chart on both is Dow futures

right chart on both is a strengthmeter - Yellow line is Yen and green line is USD

USD is a little sloooow off the mark falling in one chart....hey trading aint perfect ! :smart:

N

 

[counter_violent]

actually an overview appraisal of risk on risk off metrics can give a powerful guide to intraday flow. don't underestimate it. I wont say any more than that.

:arrowu: Wot he said.

 

[DionysusToast]

Risk on/Risk off is merely a set of new buzzwords.

What it describes is not new.

In the next 3 months, expect a bunch of web sites to pop up that will show you how to "Make $1000 in 5 minutes a day with our Risk On/Risk Off indicators".

 

[wackypete2]

Risk on/Risk off is merely a set of new buzzwords.

What it describes is not new.

Exactly.

In the next 3 months, expect a bunch of web sites to pop up that will show you how to "Make $1000 in 5 minutes a day with our Risk On/Risk Off indicators".

lol.

3 years ago no one heard of "risk on" or "risk off". It was called program trading, and before that they called it basket trading. All the same idea, just new trendy buzzwords.

Every analyst in town misuses and overuses the words so that they don't even mean much at all anymore. But they have to use the latest hip terminology if they want to get free cnbc exposure.

Peter

 

[rodolfo49]

wow, thanks for all the responses, it's my first thread ever here and I already got a lot of responses

So, new_trader, if yields are up today on the 2 and 10 yr US govt bonds and bond yields and bond prices are inversely correlated, that means that if the yields are up for the investors have pulled out money from the bond market to bring it to the stock market thus driving the bond price down?

Am I right?:|

 

[new_trader]

wow, thanks for all the responses, it's my first thread ever here and I already got a lot of responses

So, new_trader, if yields are up today on the 2 and 10 yr US govt bonds and bond yields and bond prices are inversely correlated, that means that if the yields are up for the investors have pulled out money from the bond market to bring it to the stock market thus driving the bond price down?

Am I right?:|

That is right, but I as I said earlier, it is only the mainstream media that always seem to know exactly what investors are doing with their money and why. If you want to see what they are referring to it is better to watch the yields during major market corrections or rallies as opposed to a daily basis. Also, don't forget that the Federal Reserve is buying a lot of Treasury debt.

This was a snapshot back in February after the market had rallied.

Global benchmarks
2 Year US Gov: 0.29% +8.96%
10 Year US Gov: 2.00% +2.93%

 

[scose-no-doubt]

Risk on >>>> bids coming in to riskier assets and/or traders and institutions readjusting portfolios to take on more risk. Normally the effect of positive data releases or perceived strength in future economic activity.

Risk off >>>> no/less bids coming in to riskier assets and/or traders and institutions readjusting portfolios to take on less risk. Normally the effect of negative data releases or perceived weakness in future economic activity.

Resultant can be flights to (perceived) quality e.g. gold, treasuries, US dollar in the case of risk off and flights to yield in the case of risk on e.g. in this current environment, buying euro stocks for capital gains.

The inter-market correlations or cross market movements are imo nothing more than flows into and out of those markets based on the same data and perceptions as well as the natural non arb and opportunity cost pricing mechanisms that are always prevalent in the meerkat!

Or something.

 

[Mr. Charts]

Today is a good example of a "risk-off" day with softness in equities, commodities, the euro (surprise, surprise) and also most European debt though not UK or German.