I was reading the e book, risk rating guide, which stockopedia provides. There is a part about risk on and risk on periods in the market. Does anyone have any idea on how to gauge the market if we are in a risk on or risk of period?
There is one relatively straight forward way to gauge how the market is moving towards risk on or risk off every day.
1) Choose your benchmark index which should be composed of shares like you would consider owning
2) At the end of the day note the percentage change since yesterday. The more positive, the more the market is moving to risk on.
3) At the end of the day, look on Stockopedia for your selected index under BROWSE / INDICES. From the numbers shown, calculate the ratio of Advancers to Decliners. These are the numbers of shares increasing in price / declining in price since yesterday. The higher the number, the more the market is moving to risk on. A result of 1 is neutral.
4) Consider 2) & 3) together and decide which direction, & how fast, the market is moving towards risk on & risk off.
5) If you do this every day for a few weeks you should get a pretty good idea of how the market is moving. But if there is no particular trend, then the direction will be rather choppy.
6) Yesterday for the FT250 & AIM100 indices, the numbers were very rapidly moving to risk off.
