Understand Risk On & Risk Off To Maximize Opportunities in Forex Trading.
This article will review “risk on” and “risk off” to Maximize Opportunities in Forex Trading and their effects on financial markets. One simple way to read this market sentiment is to follow the direction of the Wall Street movement.
There are 3 financial markets, namely the Forex market, stock exchange and commodity exchanges. The movement of these three markets is actually if we pay attention to each other. When the stock market rises it will affect currency or commodity movements. When the US dollar strengthens, it will also affect the stock and commodity markets. Then what causes the relationship between these three markets?
“Risk on” and “risk off” after the effect on the financial market
This time we will review about “risk on” and “risk off” as well as their effects on financial markets. The way to read market sentiment is to follow the direction of the Wall Street movement.
Every day if we notice there are always new rumors that are developing and that is represented on the exchange. Changes in sentiment or growing rumors can affect the emotions of market participants.
“Risk off” is the opposite of risk on. This means investors and traders are more dominant in taking steps to avoid risk by withdrawing funds from the stock market (selling shares). Who plays in the currency market will sell high yield currency. At that time, market participants will be happier to buy safer or safe haven assets and also low yield currencies such as the Yen and US dollar.
An example is the situation in Ukraine that is heating up, can it trigger a risk-off? If we look at Wall Street movements, as the Dow Jones index is observed, it is still likely to rise, as are the high yield currencies such as the Australian dollar and the New Zealand dollar. This shows that market participants are still optimistic about the economic outlook despite the turmoil in Ukraine.
But we should continue to monitor developments in Ukraine, because there could be a trigger that causes market players to see threats to the economic outlook so that it can trigger risk off.