Risk Aversion

[Tijani]

Am so glad to be part of this forum! this is my first time on the forum and my first post. permit me to join your forum with a question.

what is risk aversion? how does in apply in forex trading and how can a trader profit from it?

i expect a response.

STAY BLESSED

[FibMaster]

Trading is all about taking risk, for a potential gain.

If you have risk aversion, you probably should not trade. I'd be interested to hear your ideas on this.

[Lifesong]

Hi Fibmaster

I'm not sure what Tijani's reference to risk aversion is and would agree that from a trading risk perspective your view is correct. However it could also be that reference to risk aversion is in terms of global investors having a risk appetite for countries with higher yields, but posing a more risky investment climate which should be considered when investing in those countries. A classis example of how currencies benefitted from this are currencies like AUD, NZD, etc. that appreciated dramatically over the last 12-18 months due to investors seeking the higher yields eg. interest rate differentials of AUDJPY, NZDJPY, etc. Now that the global investment climate is more risky due to global economic slowdown concerns, and the fact that the interest rates of these countries have most likely peaked, global investors are moving their money to safe haven investments with lower yields. Risk aversion in the financial markets refers to speculators and investors being nervous, often due to a major economic situation where the full extent could affect the performance of the investment. This is not necessarily a scientific explanation, but according to my layman's understanding.

[FibMaster]

That sounds good to me, I'll go with that!