OPEN-SOURCE SCRIPT
Risk On/Risk Off by Gary
# Risk On/Risk Off Indicator (RORO)
## Overview
The Risk On/Risk Off (RORO) Indicator is a comprehensive market sentiment gauge that measures the balance between risk-seeking and risk-averse behavior across multiple asset classes. This indicator helps traders identify shifts in market sentiment and potential trend changes.
## How It Works
The RORO indicator aggregates normalized price movements (Z-scores) from eight major asset classes:
**Risk-On Assets (Bullish Sentiment):**
- Bitcoin Futures (BTC1!) - Cryptocurrency risk appetite
- WTI Crude Oil Futures (CL1!) - Energy sector strength
- AUD/JPY Exchange Rate - Carry trade indicator
- Emerging Markets ETF (EEM) - Global growth proxy
**Risk-Off Assets (Defensive Sentiment):**
- Gold Futures (GC1!) - Safe haven demand
- 10-Year Treasury Bonds (ZN1!) - Flight to quality
- US Dollar Index (DXY) - Reserve currency strength
- VIX Index - Market fear gauge (inverted)
## Key Features
- **Z-Score Normalization**: Standardizes different asset classes for fair comparison
- **Customizable Weights**: Adjust the influence of each asset class
- **Dynamic Coloring**: Green indicates rising risk appetite, red shows declining risk appetite
## Interpretation
- **Rising RORO (Green)**: Increasing risk appetite - favorable for equities, commodities, and growth assets
- **Falling RORO (Red)**: Decreasing risk appetite - rotation into safe havens
- **Divergences**: When RORO and price move in opposite directions, potential reversal signal
## Use Cases
1. **Market Regime Identification**: Determine current risk environment
2. **Divergence Trading**: Spot when price action contradicts underlying sentiment
3. **Portfolio Management**: Time defensive vs. aggressive positioning
4. **Confirmation Tool**: Validate breakouts and trend changes
## Settings
- **Lookback Period**: Controls Z-score calculation sensitivity (default: 50)
- **Asset Weights**: Fine-tune the contribution of each asset class
- **Color Scheme**: Customize rising/falling colors
## Best Practices
- Use on daily or higher timeframes for most reliable signals
- Combine with price action and volume analysis
- Watch for sustained moves rather than single-bar changes
---
*This indicator is designed for educational purposes. Always conduct your own analysis and risk management.*
## Overview
The Risk On/Risk Off (RORO) Indicator is a comprehensive market sentiment gauge that measures the balance between risk-seeking and risk-averse behavior across multiple asset classes. This indicator helps traders identify shifts in market sentiment and potential trend changes.
## How It Works
The RORO indicator aggregates normalized price movements (Z-scores) from eight major asset classes:
**Risk-On Assets (Bullish Sentiment):**
- Bitcoin Futures (BTC1!) - Cryptocurrency risk appetite
- WTI Crude Oil Futures (CL1!) - Energy sector strength
- AUD/JPY Exchange Rate - Carry trade indicator
- Emerging Markets ETF (EEM) - Global growth proxy
**Risk-Off Assets (Defensive Sentiment):**
- Gold Futures (GC1!) - Safe haven demand
- 10-Year Treasury Bonds (ZN1!) - Flight to quality
- US Dollar Index (DXY) - Reserve currency strength
- VIX Index - Market fear gauge (inverted)
## Key Features
- **Z-Score Normalization**: Standardizes different asset classes for fair comparison
- **Customizable Weights**: Adjust the influence of each asset class
- **Dynamic Coloring**: Green indicates rising risk appetite, red shows declining risk appetite
## Interpretation
- **Rising RORO (Green)**: Increasing risk appetite - favorable for equities, commodities, and growth assets
- **Falling RORO (Red)**: Decreasing risk appetite - rotation into safe havens
- **Divergences**: When RORO and price move in opposite directions, potential reversal signal
## Use Cases
1. **Market Regime Identification**: Determine current risk environment
2. **Divergence Trading**: Spot when price action contradicts underlying sentiment
3. **Portfolio Management**: Time defensive vs. aggressive positioning
4. **Confirmation Tool**: Validate breakouts and trend changes
## Settings
- **Lookback Period**: Controls Z-score calculation sensitivity (default: 50)
- **Asset Weights**: Fine-tune the contribution of each asset class
- **Color Scheme**: Customize rising/falling colors
## Best Practices
- Use on daily or higher timeframes for most reliable signals
- Combine with price action and volume analysis
- Watch for sustained moves rather than single-bar changes
---
*This indicator is designed for educational purposes. Always conduct your own analysis and risk management.*
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.