Posted To: MBS Commentary
When the variables informing trading decisions are more confusing, more diverse, and/or more numerous than normal, there’s one old standby to fall back on: the risk-on/risk-off trade! The rules are simple: 1. Find a variable in the marketplace… any variable! The more that other people seem to be talking about it, the better. 2. The variable can even be the price of another security. 3. Decide if the variable suggests risk-taking, or risk aversion 4. Find any security you can get your hands on (or that you already own) and trade it in the direction of the risk! 5. Profit. For a mainstream example, let’s take yesterday’s Retail Sales data. Stronger sales fuel risk appetite, suggesting selling bonds or buying stocks or both. Of course that’s a pretty typical reaction when it…(read more)
Via:: MBS Day Ahead: Risk-on, Risk-off: One Trading Rule Every Market