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  • Risk-On Risk-Off Cheat Sheet

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    Kisambira Dylan
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    Risk-on/risk-off refers to changes in investor risk tolerance that drive price behavior in financial markets. When tolerance for risk is high (risk-on), traders tend to buy stocks and high yield currencies. When risk tolerance declines (risk-off), traders purchase low yield currencies and sell stocks and high yield currencies as a safe haven. The carry trade strategy exploits this by borrowing low yield currencies, selling them to buy higher yielding currencies, profiting from the interest rate differential if risk tolerance remains high.

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    A complete guide to Cot Analysis

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    Risk-on/risk-off refers to changes in investor risk tolerance that drive price behavior in financial markets. When tolerance for risk is high (risk-on), traders tend to buy stocks and high yield currencies. When risk tolerance declines (risk-off), traders purchase low yield currencies and sell stocks and high yield currencies as a safe haven. The carry trade strategy exploits this by borrowing low yield currencies, selling them to buy higher yielding currencies, profiting from the interest rate differential if risk tolerance remains high.

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    22 views1 page

    Risk-On Risk-Off Cheat Sheet

    Uploaded by

    Kisambira Dylan
    Risk-on/risk-off refers to changes in investor risk tolerance that drive price behavior in financial markets. When tolerance for risk is high (risk-on), traders tend to buy stocks and high yield currencies. When risk tolerance declines (risk-off), traders purchase low yield currencies and sell stocks and high yield currencies as a safe haven. The carry trade strategy exploits this by borrowing low yield currencies, selling them to buy higher yielding currencies, profiting from the interest rate differential if risk tolerance remains high.

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    © All Rights Reserved
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    RISK-ON / RISK-OFF

    Cheat Sheet

    WHAT IS RISK-ON & RISK-OFF?


    • Price behaviour is driven by investor risk tolerance.

    • Risk-on & risk-off refer to changes in risk sentiment.

    • RISK-ON: When stocks are trending higher, traders tend to buy high yield currencies.

    • RISK-OFF: When stocks are trending lower, traders tend to buy low yield currencies.

    RISK-ON & RISK-OFF CURRENCIES

    THE CARRY TRADE

    1. Borrow low yield currencies.

    2. Sell low yield currencies.

    3. Buy high yield currencies.

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