Risk On vs. Risk Off

General topics about Forex trading

Re: Risk On vs. Risk Off

Postby jjay » Sat May 21, 2011 9:55 am

Sure, but we all know markets, & the people/machines who trade them, are extremely fickle.

Gold & it's risk sensitive based cousins are very heavily traded for a variety of reasons by very different sectors of the trading/investment community every day of every week.

Usually when the market turns risk averse or risk positive, the general cross section of the market behaves exactly as you would expect & clues will reveal themselves right across the trading spectrum. But occasionally there might be other reasons why one or more particular asset class is receiving heavier attention than others.

The varied & diverse participation (professional, institutional, retail, commercial etc) involved in providing ongoing liquidity to the relevant sectors of the market make it almost impossible to accurately pigeon-hole events to an exact specification on every occasion.
That's why sometimes certain individual pairs or groups of actively traded instruments will behave out of character to what's normally expected.......when machines & humans face off in the money markets there's always room for the odd banana skin to cause one or two minor bumps & grazes.
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Re: Risk On vs. Risk Off

Postby whipcrack » Sat May 21, 2011 5:09 pm

So, translating that info down to simple basics, what exactly are you using to actively trade Gold & Silver then?
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Re: Risk On vs. Risk Off

Postby jjay » Sun May 22, 2011 2:59 am

Rom wrote:My gut feeling is that drawdown is moderate, and then when I don't expect it profit explodes one month.
The scary scenario is no PIIGS problems, EURUSD goes to the roof and people lose interest in safe havens.

Expect sleepless nights with this strategy if Greece can pay all dept

I don't think novices (or even most experienced operators) would really benefit from that type of scenario would they.
Sounds like there's very little control of either capital or emotions & there doesn't appear to be any kind of solid structural foundation for traders to work off.

The object of the exercise when starting out in this business is to keep a tight rein on your capital & emotions until you're satisfied that the model or strategy you're using is capable of returning a consistently acceptable positive expectancy.

Erratic or sporadic PnL models that are devoid of a solid foundation or structure from which to work from & light on accountability measures usually drain confidence & belief from traders, especially novices.

But if that type of operation suits your personal risk profile & strategy outlook, then good luck.
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Re: Risk On vs. Risk Off

Postby whipcrack » Sun May 22, 2011 9:52 am

Rom wrote:The big problem with the strategy occurs when we are overleveraged.

That's a major drawback of any strategy, not just this one.

Rom wrote:We must undestand the nature of the forces, how the big players will react, their mathematical models and their psycology ...

I'm not so sure you need to understand them at all.
What is imperative however is that you effectively operate & manage a model/strategy that has proven to offer you a workable edge trading across specific market opportunities.

As long as you have the ability to identify & act upon them whenever they reveal themselves as potentially lower risk/higher odds opportunities, then you don't need to worry about the more superior capitalized competition.

The massive advantage you have over them is the fact you're far more flexible & nimble. You can operate more efficiently at the micro level than them & also pick & choose your entry, exit & timing arrangements more fluidly than they can.

That's where your edge lies.
Not in attempting to match them with their model types or trying to second guess their motives & objectives.
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