RISK REGIME GUIDE
Master market sentiment analysis and hourly risk classification
What is the Risk Regime?
The Risk Regime is an AI-powered market sentiment indicator that classifies the current market environment hourly into three states: Risk-On, Neutral, or Risk-Off. It combines multiple financial indicators including BTC price, SPY performance, VIX levels, and correlation data to provide a real-time view of market risk appetite.
INFO
Understanding Regime Types
The market is classified into three distinct regimes based on a composite score derived from multiple indicators.
Markets are bullish with strong appetite for risky assets. Investors are confident, volatility is low, and capital flows into growth assets like crypto and tech stocks.
Markets are in transition or consolidation. Neither bullish nor bearish signals dominate. Often occurs during periods of uncertainty or before major events.
Markets are defensive with capital flowing to safe-haven assets. Investors are risk-averse, volatility is elevated, and risky assets underperform.
Reading the Regime Score
The Regime Score is a numerical value ranging from -1 (extreme risk-off) to +1 (extreme risk-on). It provides a more granular view than the categorical regime type.
SCORE INTERPRETATION
Understanding the regime score scale
Values above +0.5 indicate strong risk-on conditions. Values below -0.5 indicate strong risk-off conditions. The score changes gradually as market conditions evolve, providing early warning of regime shifts.
Regime Components
The regime score is calculated from multiple market indicators, each capturing different aspects of market sentiment.
BTC Price
Bitcoin price movements as a barometer of crypto market sentiment and risk appetite
SPY Performance
S&P 500 ETF tracking traditional equity market performance
VIX Level
Volatility Index measuring expected market volatility and fear
Correlation Data
Cross-asset correlations indicating market stress or complacency
Score Change
4-hour momentum of the regime score indicating directional trend
Reading the Charts
The Risk Regime page displays an interactive dual-axis chart showing BTC price overlaid with the regime score. Color-coded backgrounds indicate the current regime: green for risk-on, orange for neutral, and red for risk-off. Use the chart to identify correlations between price movements and regime changes.
CHART EXAMPLE
Dual-axis BTC price and regime score
TIP
Selecting Time Ranges
Choose from multiple time ranges to analyze regime behavior: 24 hours for intraday analysis, 3-7 days for short-term trends, or 30-90 days for understanding longer-term market cycles. Different time ranges reveal different patterns in market behavior.
TIME RANGE SELECTOR
Choose your analysis timeframe
Regime Distribution
The distribution section shows how much time the market spent in each regime over your selected period. This helps you understand the overall market bias and identify whether current conditions are typical or exceptional.
DISTRIBUTION EXAMPLE
7-day regime distribution
Trading with Risk Regimes
Adapt your trading strategy based on the current regime for better risk-adjusted returns.
Risk-On Strategies
Increase exposure to risk assets like crypto, growth stocks, and high-beta positions
Consider leveraged positions with appropriate risk management
Look for breakout trades and momentum plays
Reduce hedges and safe-haven positions
Focus on higher-risk altcoins over BTC for potentially higher returns
Use trailing stops to ride trends while protecting gains
Neutral Strategies
Reduce position sizes and wait for clearer signals
Focus on range-bound trading and mean reversion strategies
Maintain balanced portfolio with mix of risk and safe assets
Prepare for breakout in either direction
Use options strategies that profit from low volatility or time decay
Avoid chasing moves without confirmed regime change
Risk-Off Strategies
Reduce or hedge risk asset exposure
Increase allocation to stablecoins, USD, gold, or bonds
Focus on capital preservation over growth
Look for short opportunities or inverse positions
Avoid catching falling knives - wait for regime change confirmation
Use tighter stops and smaller position sizes
WARNING
Event Volatility Warnings
The system detects upcoming high-impact economic events and displays warnings. During these periods, regime readings may be less reliable as markets await data releases. Use extra caution and consider reducing positions before major events.
EVENT WARNING EXAMPLE
High-impact events detected
Event Volatility Warning
Upcoming Events: Fed Interest Rate Decision, CPI Release
NOTE
Frequently Asked Questions
How often is the regime updated?
The risk regime is calculated and updated every hour using the latest market data. Data is cached for 15 minutes to ensure optimal performance.
What causes regime changes?
Regime changes occur when the composite score crosses threshold boundaries (+/-0.3). This can be triggered by significant price movements, volatility spikes, or changes in cross-asset correlations.
Is the regime a trading signal?
The regime is a context indicator, not a direct trading signal. Use it to calibrate your risk exposure and strategy selection, not as an entry/exit trigger. Combine with other analysis.
Why does the regime sometimes lag price moves?
The regime uses smoothed indicators to avoid false signals from short-term noise. This creates some lag but provides more reliable signals. Watch the score momentum for early warnings.
How accurate is the regime classification?
Historical backtesting shows strong correlation between regime type and subsequent market performance. However, no indicator is perfect - use as part of a comprehensive analysis framework.
What if regime and price diverge?
Divergences can be early warning signals. If price rises during risk-off or falls during risk-on, be cautious - the regime may be signaling a potential reversal.
Pro Tips
Check the regime first thing in the morning to set your daily trading bias
Watch for regime score momentum (4h change) for early warning of shifts
Use longer time ranges (30-90 days) to understand where current conditions fit historically
The transition from neutral to risk-on/off often provides the best trading opportunities
Combine regime with economic calendar - major events can trigger regime changes
Track component statistics to understand which indicators are driving the regime
Be extra cautious trading against the prevailing regime
Use regime changes as a trigger to review and adjust your portfolio allocation
During risk-off, focus on preserving capital rather than maximizing returns
In extended risk-on periods, gradually take profits rather than waiting for regime change
TABLE OF CONTENTS
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Learn how to read and trade economic events like NFP, CPI, and central bank decisions
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