# 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

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*This indicator is designed for educational purposes. Always conduct your own analysis and risk management.*