Free Trading School · Level 11: Sentiment, Intermarket and Divergence
Risk-on and risk-off
Markets swing between two moods. In risk-on periods, investors feel confident and buy riskier assets. In risk-off periods, fear dominates and money flows to safety. Knowing the current mood helps explain moves that seem unrelated to any one piece of news.
| Asset | Risk-on (confidence) | Risk-off (fear) |
|---|---|---|
| Stocks | Rise | Fall |
| Commodity currencies (AUD, CAD, NZD) | Strengthen | Weaken |
| Safe havens (USD, JPY, CHF, gold, government bonds) | Lag or weaken | Strengthen |
| Crypto | Usually rises | Usually falls |
| VIX (volatility index) | Low | Spikes |
When everything risky falls together, it is the mood, not the details. Reduce size until it calms down.
Quick answers
Markets swing between two moods. In risk-on periods, investors feel confident and buy riskier assets. In risk-off periods, fear dominates and money flows to safety. Knowing the current mood helps explain moves that seem unrelated to any one piece of news.
When everything risky falls together, it is the mood, not the details. Reduce size until it calms down.
Japanese yen. The yen is a traditional safe-haven currency.
Next lesson: Measuring sentiment