Live: Risk On or Risk Off?

Hi all.

In today’s webinar, I went through some of the basic fundamentals I learned when I first started trading in 2020. A lot was happening around that time. COVID started, lockdown began, markets started crashing. It was all new to me and all the fundamentals I learned here at FMP began to piece together.

The first thing I do on the weekend when I do my analysis is to check whether we have a Risk on or Risk off environment. What does that mean?

A “risk on” mood refers to traders’ willingness to make riskier trades. A “risk off” mood refers to traders’ reluctance to make riskier trades and play it safe. This is important to identify so that your trades are aligning with the market and make sure you are trading with and not against the market sentiment. You can learn more on this topic on Baby Pips, I have put the link below. They even have a Risk on, Risk off sentiment barometer to help you decide the current market sentiment.

Risk-On / Risk-Off Meter

During a Risk environment, traders tend to shift their capital from lower-risk assets like government bonds, gold, and “safe haven” currencies to higher-risk assets such as equities, commodities, crypto and high-yielding currencies such as the Australian dollar (AUD) and New Zealand dollar (NZD). When the market sentiment changes to Risk off the opposite happens.

At the moment it’s debatable whether we are risk on or risk off mood. But money is flowing out of the  S&P 500, Nasdaq and other stock indices are going down and heading into the DXY, so you could say risk is off.

Some of the other important charts to keep an eye on are the Ten-year bond (TNX), VIX (fear index), commodities such as silver and GOLD, and also the CHF as it is seen as a Safe haven.

In terms of news, we had the Flash manufacturing PMI figures come out worse than expected for the Eurozone. Germany is still struggling which should be concerning. As I mentioned in the webinar, the Manufacturing numbers have a knock-on effect on employment, average earnings, and consumer spending. So these figures are very crucial and are tracked by the banks and hedge funds to decide the price of currency.

In the Middle East, the situation appears to have calmed down a little, regarding Israel, Gaza, and Iran. It would be very risky to trade Oil or any Oil-related stocks during this time due to geopolitical events. Keep an eye on the news and don’t leave trades open on the weekend.

Lastly, I was explaining why the GBP was possibly dropping more than the other majors. Reports are suggesting that BOE could be heading for the first rate cut in June as the inflation in the UK has been dropping at a faster rate. Again these numbers can be manipulated but that is what the official figure is.

According to the ONS, the average UK household now spends around £4,124 on groceries and £1,220 on food at restaurants and takeaways every year. As a result, UK households spend 16% of their budgets on food and non-alcoholic drinks. This averages to about £100 per week on just grocery shopping. Again these numbers can vary as it depends where you live in the UK and also how each household spends. The ONS also found a new way to show fewer deaths than actual. So this figure is questionable too.

image 2024 04 23 125913844








Average UK Household Cost of Food 2024

ONS UK, 2024

You can watch the full webinar below

650x60 100 Free training course 4