Risk On or Risk Off – Decide At Your Peril

When looking at trading markets in general – I always consider a single (and very important) overlaying theme. Superceding  all others, and guiding my decision making process – regardless of asset class, current news headlines, technical indicators, price and sentiment (which has now become a commodity itself – being “resold” across the internet at any number of bogus websites) I will always look for the answer to one fundamental question.

Are investors currently considering taking on risk? – or looking to protect themselves against. Very simple and to the point.

Is risk on or is risk off ?

When risk is considered “on” – money flows to those assets where investors feel there is opportunity to see a return on their hard earned dollar. A time when things are “looking up” and investors feel somewhat safe in taking their money out of savings – and placing it elsewhere (the biggest measure of risk on this planet is currently the U.S stock market).

When risk is “off” – money flows back into savings accounts, back into “security” (out of risk and U.S equities) – and subsequently back into currencies such as the U.S dollar and the Japanese Yen ( are you starting to see how this works? ).

So……if nothing else – a fundamental knowledge/feel  as to weather or not  the current investment environment is “risk seeking” or “risk averse” can go a long way in keeping an investor / trader on the right side of the market.

And the question begs to be asked – is it risk on? – or risk off?

11 Responses

  1. eddie torrez November 27, 2012 / 6:06 pm

    I think the event that will push people back into the stock market will be when Europe kicks the can down the road again. The big question is when, I’m surprised they have not done it yet. By the way thanks for stirring things up with the SMT subscribers they really are a disfunctional group of investors, rock the boat a little bit and they bring out there pitch forks looking to tar and feather any body that disagrees with Gary. I like Gary’s service but like you I don’t blindly follow him. I like your investing style keep up the good work.

    • Graham November 27, 2012 / 6:55 pm

      Holy crap Eddie have you got that right!!
      One of the tines are still stuck in my ribs…..help!!!!!

    • Forex Kong November 27, 2012 / 7:22 pm

      Guys….lets put things in perspective.

      You´ve been involved with a paid service – and in turn (like myself and the others there) have a certain expectation as to what indeed you are paying for – fair? Kudos to Gary for even tolerating it.

      The fact that the “group at large” are a touch “touchy” – is really of no consequence – and certainly of no concern here.

      I hope to develop a community here that can exchange ideas and interect with mutual respect for all users – and if not…..I’ll just cut/ban/thrash/slice anyone and everyone looking to do anything otherwise.

      I will make mistakes..as we all will – but welcome input / learning from others. The day you think you’ve got this “figured out” is the day you start telling others to “twiddle their thumbs” – and I think we know how that works out.

      Lets make a point of leaving “smt” out of discussions here – fair?

  2. Ronnie Byrd November 27, 2012 / 7:57 pm

    Kong, You have a great concept in the making with those principles as the guideline.I wish every body would show due respect for whom ever they are paying and take what they may have learned there,add that to what you have to add as well as others here to give all a better chance in this market.My # 1 ingredient to a successful trade is in properly timing the currencies before entry into Pm’s,or the equity markets.If there is a secret key to trading I believe that is the answer.No body can trump the daily news without being able to read the currencies reactions and adjusting to the markets,please correct me if I am wrong.
    Thanks, Ronnie

    • Forex Kong November 28, 2012 / 7:40 am

      I have made effort to overlay others analysis “on top” of my currency indicators/followings – and have yet to find anything as accurate and timely as my own calls – based purely in movement of currencies. Cycles in general come a close second, but in observing “the professionals” – I’ve seen currency movement is most certainly ahead of the game. Usually a good two days ahead of turn , bottoms quite easily to see forming – as well as potencial tops so – Im sticking with what I know works.

      I read back a day or two now – the tweets here etc…and see things playing out exactly as suggested – again soley via observation of currency movement.

      If you are in a position of cash ( or close ) you are setting up fantastically to take advantage of this next up swing in the dollar – and “dip” in both gold and equities. Congrats!

  3. Ronnie Byrd November 27, 2012 / 8:15 pm

    Kong, In keeping with the theme of your post I want to add that I went mostly risk off in my retirement account today made up completely of mutual funds offerings. I had to base this off of the dollar move today knowing full well it may put in a swing tomorrow, but that is what I can make work for me.If it drops to a left translated cycle I will renter accordingly.Comments or suggestions welcome.

  4. schmederling November 28, 2012 / 9:50 am

    PM’s took a nice smash on COMEX open, delivery month or a bouncing DXY who knows. I suspect Silver will lead the charge in the bounce, however suspect that Friday we will receive further downward movement in the PM’s.

    • Forex Kong November 28, 2012 / 9:53 am

      A day here – a day there…..as I see it this bounce in the dollar will be more like a “blip” – and then “anything and everything” under the sun – is off to the races for the duration of the year. Those holding silver are fine…and those getting rinsed in gold need to learn to hold tight!

  5. hf November 28, 2012 / 3:00 pm

    adding a gold bullion fund, 1 % exposure, sold something else nearly at 1 % exposure.
    total exposure to everything all told is 4 %, 96 % is ca$h or equivalents…
    happy trading…

    • Forex Kong November 28, 2012 / 3:24 pm

      Wow Howard – you are in a really good spot here if you’ve got that kind of dry powder. I am still 100% in cash short of a couple grand worth of gold related options – which in all I don´t really plan to add to. I will likely utilize the same ol strategy, and filter off profits / reload as I go.p

      A real move in the markets today – a whipsaw as the recent posts outlines, and even moreso evidence of the big boys throwing their weight around before this thing heads north.

      Profits coming……very very soon.

  6. hf November 28, 2012 / 3:01 pm

    i note that GDX and xgd.to are up for the day…

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