Risk-On and Risk-Off are the two allocation profiles a strategy can run: Risk-On is the normal profile, and Risk-Off is the defensive profile the strategy switches to while a risk condition is triggered. They are a pair — each carries its own weighting method and its own invested portion, so the same instruments can be held very differently in each. A strategy is always in one of the two, and it never sits in neither.
What is the difference between Risk-On and Risk-Off?
The difference is the allocation profile, not the activity: both profiles are complete allocations, and the strategy runs continuously under whichever one is active. In the Allocation card the two sit side by side — Risk-On is the allocation that runs while no risk condition is firing, Risk-Off the one that runs while one is. Each has its own allocation method picker ("Method for Risk-On" / "Method for Risk-Off") and its own invested portion, so Risk-Off can use a different weighting method, put less capital to work, or both. Until you configure the defensive side, the app shows "Risk-Off allocation needs to be set".
What switches a strategy from Risk-On to Risk-Off?
A risk condition does, and only a risk condition. While no configured condition is triggered the strategy runs Risk-On; while one is triggered it runs Risk-Off. With two conditions configured, either one is enough — the risk list reads "Any match → Risk-Off", the two-condition combination. When the condition clears, the strategy returns to Risk-On. How quickly the switch reaches your holdings depends on the condition's confirmation delay and its auto-rebalance toggle.
Does Risk-Off stop the strategy or sell everything?
No — Risk-Off does neither. Going Risk-Off swaps in the Risk-Off allocation profile and nothing more: the strategy keeps running, keeps its rebalance schedule, and keeps holding whatever that profile allocates to. It does not pause, halt, or stop, and it does not liquidate to cash unless the Risk-Off profile you configured is itself cash-heavy. If you set the Risk-Off profile to hold less capital at work, the difference shows up as a larger cash reserve — see how risk conditions can lower the invested portion.
Defaults in Fincanva
- With no risk condition configured, a strategy stays in Risk-On at all times and the single allocation you set applies always ("No Risk conditions configured — this allocation runs at all times.").
- The Risk-Off profile is independent: its own method, its own parameters, its own invested portion. It may also be left identical to Risk-On, in which case switching changes nothing.
- The allocation summary badges the two states as "Risk-On only" or "Risk-Off set up", and a Risk-Off profile matching Risk-On is labelled "Matches Risk-On".
- Fincanva does not say how defensive a Risk-Off profile should be, or when a strategy should be in it. See Is this financial advice?.
Worked example
A strategy holds three equity ETPs, weighted equally, with all of its capital invested — that is its Risk-On profile. You set its Risk-Off profile to the same three instruments but with a lower invested portion, leaving part of the capital in cash. A risk condition then triggers.
The strategy switches to Risk-Off at the next rebalance (or immediately, if the condition has Auto-rebalance on). It sells down each holding to the smaller target, and the freed capital sits in the cash reserve. It still holds all three ETPs, still rebalances on schedule, and still records positions and results — it is simply carrying less market exposure. When the condition clears, the strategy switches back to the Risk-On profile and the cash is put back to work. Had you instead set the Risk-Off profile identically to Risk-On, this whole sequence would have produced no change at all.
Learn more: Risk conditions
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Fincanva provides no financial advice. Backtests show what would have happened — not what will.
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