How do you read a risk-off day in an equity index?

A risk-off day is one in which investors move away from riskier assets, such as equities, and toward cash, bonds or currencies seen as safe. Index traders often read these days through the same lens as currency traders, looking at what flows into the yen, the franc or government bonds while the index falls. Carry trade explained describes how the same flows can unwind carry positions, which is one reason a risk-off day can hit both currencies and indices together.

The question is how you tell a risk-off day from a normal fall in an index. A single bad session is not a regime, and members who trade indices often wait for the move to persist across sessions and across related assets before they change their plan. Leverage and margin explained covers how a leveraged index position is sized, which matters more on a day when the index moves quickly.

We would like to hear how you read it:

• What would make you call a risk-off day, rather than a normal fall in the index?
• Which related asset do you check first: the yen, a bond or the dollar?
• Do you reduce index exposure on a risk-off day, or hold through it?
• Have you misread a risk-off day? What signal did you miss?

Please share your own approach and reasoning, not calls for others to copy. Posts that promise a direction or sell signals will be removed.