Hi from Andrea Unger. Today I want to talk about Metals, futures of metals and I put this list here so you can see what I mean.
Obviously you know about gold the first precious metal you could think of, silver, platinum and copper.
These are all interesting instruments to develop systems. In particular gold is a very good market for traders; it’s a market where you can develop trend-following systems, countertrend systems, bias systems, especially bias, believe me, there are very interesting opportunities on gold to discover and to take advantage of.
So gold is one of my favorite instruments to trade with trading systems. Silver is also very good but much more nervous compared to gold and it’s harder to find a good model that fits silver.
So if you’re starting now developing systems, start with gold and forget about silver. And consider also that silver is a very expensive Market, and also because of the moves that it has. Sudden and strong moves. Your stops that have to be wide enough to face this Market will be or have higher chances of being hit.
So silver is a market where you can get a certain degree of frustration when you develop a system so I will not put it as as first choice. So, certainly gold and eventually Platinum, which year after year is becoming more interesting. The only drawback on Platinum is the fact that, I might say, it is highly correlated to gold so if you have a model and apply that model to gold it will be useless to add the same model on Platinum in your portfolio because it would actually over expose yourself to probably a similar move so at one point you will have to choose between the two.
There is a sort of inverted correlation in the moves of copper to gold at least in the short-term, so Copper is another Market that is interesting and responds well to countertrend, mean-reverting moves, but also trend-following… so… actually, believe me, copper has very explosives and sudden moves.
The point is that these moves often end up with a huge retracement and that’s why I mentioned the counter trends because on the excessive moves you have rebounds and the point is that we can take advantage of both so when you start developing on copper try to manage your position in the best way possible. Investigate what the best way to management the position could be because it offers incredible opportunities but it is also a very nervous market so you have to be pretty much skilled to trade it.
Gold for sure Number One, Platinum, don’t forget copper, keep silver for your later days.
Gold on intraday should work with stop loss of at least $1,000 but 1,500 or 2,000 is better; Platinum is similar and Copper can be traded with stops starting from 700-800$ up, and all these are linked to the characteristics of the moves of the market: if you use tighter stops you waste your strategy because you don’t adapt anything to the way that market moves.
In case you really love gold you could consider micro gold to trade instead of gold if you want to dedicate a lower level of risk. Don’t use mini gold because there is not much liquidity, micro gold is much better, you could choose that one, is a good market to start with smaller capitals.
That’s it! Stay tuned for other Markets, Ciao from Andrea Unger.