Global Risk Terminal – Multi-Asset Macro Sentiment Indicator

Description:
The Global Risk Terminal is a sophisticated macro sentiment indicator that synthesizes signals from three key cross-asset relationships to produce a single, actionable risk appetite score. It is designed to help traders and investors identify whether global markets are in a risk-on (growth-seeking) or risk-off (defensive) regime. The indicator analyzes the behavior of commodities, equities, bonds, and currencies to generate a comprehensive view of market conditions.

Indicator Output:
The Global Risk Terminal produces a normalized risk score ranging from -1 to +1:

Positive values indicate risk-on conditions (growth assets favored)

Negative values indicate risk-off conditions (safe-haven assets favored)

Core Components:

Growth Pulse (Copper to Gold Ratio, HG/GC)

Purpose: Measures investor preference for industrial growth versus safe-haven assets.

Interpretation:

Rising ratio → Copper outperforming gold → Risk-on environment

Falling ratio → Gold outperforming copper → Risk-off environment

Flat ratio → Transitional market phase

Technical Implementation: Dual moving average slope method (fast MA default 20, slow MA default 40). Positive slope = +1, negative slope = -1, flat slope = 0

Equity Rotation (Russell 2000 to S&P 500 Ratio, RTY/ES)

Purpose: Tracks rotation between small-cap and large-cap equities, revealing market risk appetite.

Interpretation:

Rising ratio → Small-caps outperforming → Strong risk-on

Falling ratio → Large-caps outperforming → Defensive positioning

Technical Implementation: Dual moving average slope method (same as Growth Pulse)

Flow Gauge (10-Year Treasury to US Dollar Index, ZN/DXY)

Purpose: Captures liquidity conditions and cross-asset capital flows.

Interpretation:

Rising ratio → Treasury prices rising or USD weakening → Liquidity expansion, risk-on environment

Falling ratio → Treasury prices falling or USD strengthening → Liquidity contraction, risk-off environment

Technical Implementation: Dual moving average slope method

Composite Risk Score Calculation:

Analyze each component for trend using dual moving averages

Assign signal values: +1 (risk-on), -1 (risk-off), 0 (neutral)

Average the three signals:
Risk Score = (Growth Pulse + Equity Rotation + Flow Gauge) / 3

Optional smoothing with exponential moving average (default 3 periods) to reduce noise

Interpreting the Risk Score:

+0.66 to +1.0: Full risk-on – favor cyclical sectors, small-caps, growth strategies

+0.33 to +0.66: Moderate risk-on – mostly bullish environment, watch for fading momentum

-0.33 to +0.33: Neutral/transition – markets in flux, signals mixed, exercise caution

-0.66 to -0.33: Cautious risk-off – favor defensive sectors, reduce high-beta exposure

-1.0 to -0.66: Full risk-off – strong defensive positioning, prioritize safe-haven assets

How to Use the Global Risk Terminal to Frame Trades:

Aligning Trades with Market Regime

Risk-On (+0.33 and above): Look for buying opportunities in cyclical stocks, high-beta equities, commodities, and emerging markets. Use long entries for swing trades or intraday positions, following confirmed price action.

Risk-Off (-0.33 and below): Shift focus to defensive sectors, large-cap quality stocks, U.S. Treasuries, and safe-haven currencies. Prefer short entries or reduced exposure in risky assets.

Entry and Exit Framing

Use the risk score as a macro filter before executing trades:

Example: The risk score is +0.7 (strong risk-on). Prefer long positions in equities or commodities that are showing bullish confirmation on your regular chart.

Conversely, if the risk score is -0.7 (strong risk-off), avoid aggressive longs and consider short or defensive trades.

Watch for threshold crossings (+/-0.33, +/-0.66) as potential inflection points for adjusting position size, stop-loss levels, or sector rotation.

Confirming Trade Decisions

Combine the Global Risk Terminal with price action, volume, and trend indicators:

If equities rally but the risk score is declining, this may indicate a fragile rally driven by few leaders—trade cautiously.

If equities fall but the risk score is rising, consider counter-trend entries or buying dips.

Risk Management and Position Sizing

Strong alignment across components → increase position size and hold with wider stops

Mixed or neutral signals → reduce exposure, tighten stops, or avoid new trades

Defensive regimes → rotate into stable, low-volatility assets and increase cash buffer

Framing Trades Across Timeframes

Use the indicator as a strategic guide rather than a precise timing tool. Even without the MTF table:

Daily trend alignment → Guide swing trade bias

Shorter timeframe price action → Refine entry points and stop placement

Example: Daily chart shows +0.6 risk score → identify high-probability long setups using intraday technical patterns (breakouts, trend continuation).

Sector and Asset Rotation

Risk-On: Focus on cyclical sectors (financials, industrials, materials, energy), small-caps, high-beta instruments

Risk-Off: Focus on defensive sectors (utilities, consumer staples, healthcare), large-caps, safe-haven instruments

Alert Integration

Set alerts on the risk score to notify you when markets move from neutral to risk-on or risk-off regimes. Use these alerts to plan entries, exits, or portfolio adjustments in advance.

Customization Options:

Moving Average Length (5–100): Adjust sensitivity of trend detection

Score Smoothing (1–10): Reduce noise or see raw risk score

Visual Themes: Six preset themes (Cyber, Ocean, Sunset, Monochrome, Matrix, Custom)

Display Options: Show or hide component dashboards, main header, risk level lines, gradient fill, and component signals

Label Size: Tiny, Small, Normal, Large

Alert Conditions:

Risk score crosses above +0.66 → Strong risk-on

Risk score crosses below -0.66 → Strong risk-off

Risk score crosses zero → Neutral line

Risk score crosses above +0.33 → Moderate risk-on

Risk score crosses below -0.33 → Moderate risk-off

Data Sources:

HG1! – Copper Futures (COMEX)

GC1! – Gold Futures (COMEX)

RTY1! – Russell 2000 E-mini Futures (CME)

ES1! – S&P 500 E-mini Futures (CME)

ZN1! – 10-Year U.S. Treasury Note Futures (CBOT)

DXY – U.S. Dollar Index (ICE)

Notes and Limitations:

Works best during clear macro regimes and aligned trends

Use with price action, volume, and other technical tools

Not a standalone trading system; serves as a macro context filter

Equal weighting assumes all three components are equally important, but market conditions may vary

Past performance does not guarantee future results

Conclusion:
The Global Risk Terminal consolidates complex cross-asset signals into a simple, actionable score that informs market regime, portfolio positioning, sector rotation, and trading decisions. Its user-friendly layout and extensive customization options make it suitable for traders of all experience levels seeking macro-driven insights. By framing trades around risk score thresholds and combining macro context with tactical execution, traders can identify higher-probability opportunities and optimize position sizing, entries, and exits across a wide range of market conditions.