Risk sentiment / Aversion?

Title says it all really. I have been through the school but i am still unsure of what exactly Risk aversion is, when it happens and what happens as a result of it. Any help welcome, thanks.

Put simply, risk aversion means fear. It’s a situation where market participants are not eager to take risk and look to be more conservative with their money.

When fear enters the market, you can “feel” it to a large degree. Here are some specific things I notice when this happens:

  • price action becomes jerky
  • broker spread widens
  • traders are quick to get out of their positions at breakeven, so key levels are snapped up very quick, sometimes too quick to get your trade entered; in this case I’ve found that limit orders can be helpful