"The stock markets only know one direction: up!". When you hear this sentence, you should be careful. Quickly forgotten are the times of the fall of Lehman Bank, when the Nikkei crashed and Wall Street was on the cliff.

It's not just when the economy weakens that an industry flourishes: That of the crash prophets. Authors like Marc Friedrich and Markus Krall are read millions of times. Titles such as "The Biggest Crash of All Time", "World System Crash", "The Draghi Crash" or "The Crash Is Here" regularly appear at the top of order lists.

Anyone who has experienced market sentiment swinging back and forth between "risk-on" and "risk-off" on a daily basis is justifiably unsettled. There are daily headline risks, geopolitical risks, and economic risks, not to mention the ongoing political rumor mill. This news can weigh on an investor's and investor's emotions and lead to selling too soon or rushing in. Institutional investors counter this. They work with risk-on and risk-off indicators. But what exactly do "risk-on" and "risk-off" mean?

When investor sentiment is optimistic about the economy, financial markets and industry, riskier assets tend to become more expensive. This is known as "risk-on." Conversely, when uncertainty or negativity hits the market, investors tend to sell these riskier assets and buy "safer" assets, i.e. those that are generally less vulnerable to a weakening outlook or negative investor confidence. This is "risk-off".

To better assess daily sentiment and trade more thoughtfully, TRADEofficer has released the Crash Indicator or Risk Indicator. The risk indicator gives a daily percentage on or off signal.

The Risk-On / Risk-Off indicator supports the evaluation of the current situation of the stock market. It can be used as a filter or for position size control. A risk-on/off (overall indicator) is formed from a selection of indicators. The calculation of the risk-on/risk-off indicator includes individual factors: Market breadth, factor indices, correlations and volatilities. While the informative value of the individual indicators is limited on its own, the informative value increases significantly if several of the indicators are taken into account at the same time.

Risk indicator ON:

Sentiment for the stock market is positive. There is a strong or very strong probability of rising prices. This means that you should plan purchases or hold existing positions today.

Risk indicator OFF

Sentiment for the stock market is negative. There is a very strong or strong probability of falling prices. This means that you should plan to sell or reduce risk today.