Bias Pattern in Platinum: How To Exploit It with a 2-Line Script (Backtest and Optimization)

by Andrea Unger

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Platinum is one of the most traded precious metals at the CME. As to recurring behaviors, this market has an interesting intraday bearish bias that follows that of Gold.

In this video, you’ll learn how to identify this recurring pattern and use it to build a simple strategy consisting of only 2 lines of code.

You’ll also learn how to set the entry conditions in order to reduce the number of trades and increase the average trade value.

Don’t miss it!

Enjoy the video 😎

 

Transcription

Hey everyone! One of the coaches of Unger Academy here, and today we're going to be talking about to build a trading system based on the recurring behaviors in the Platinum future. 

First of all, we're going to analyze the intraday price movements that characterize this instrument, and then we're going to explore the best strategies to be successful, at least from a statistical standpoint, on this market.

Platinum is one of the most traded precious metals at the CME along with Gold, Silver, and Palladium.

How to Identify the BIAS

With the help of our proprietary software, which you can see on the screen, we can plot the average trend of the price of this raw material and try to understand what are and what can be the best times to open the positions on this market.

So let's take a look at the intraday average behavior of this instrument. If we plot the average way in which prices move during a standard trading day, we can see that there's a bearish trend in the morning, between 4 am and 9 am.

This trend is quite evident, and more importantly, it's also quite consistent. Moreover, this bias, this recurring behavior, seems to track the trends of the Gold future pretty well. In fact, on average there's a drop in the prices of Gold around the same hours.

So what we can do now is to start from the information provided by this chart and use it to build a strategy that trades the Platinum future only on the short side. The script we'll build will be very simple, just like the ones we've seen in our previous videos. The entry and exit times will be precisely at 4 am and 9 am.

Strategy Development

But let's write our strategy. Let's start from the short entry conditions, so let's write, "if t=400 then sellshort next bar market", and then the second line of code, "if t=900 then buytocover next bar market". 

We don't write only "buy" because in this case, we only want to close the short positions, while if we wrote "buy" we would not only have closed the short position but also opened another long position.

Okay, let's stop here and compile the strategy and see what the performance report tells us.

First of all, we can see that the equity line is rising. And it has a pretty good average trade of about a little over $30. We have a lot of trades, about one a day. So we have a total of about 3,000 trades.

Let's also check out how much the strategy would have earned trading it with a single contract. It's around $94,000, and if we also look at the yearly performance of the strategy, we see that there are only two years in the red.

In today's video, we don't just focus on finding the best times to trade, but we also want to identify a possible entry setup that can be effective.

Operational Filters

In one of our tests, we focused on checking out the strategy's performance if we go short only when there's a decrease in the price compared to the previous session. That is: if the close of the current session is lower than the close of the previous session.

So let's see how we can code this new condition. If the time is equal to the 4 "and closes(1)" (which stands for the close of the session that has just ended) is less than the "closes(2)" (which is the close of the previous session), then the short position will be opened.

No condition is needed for the "buytocover" instruction since it simply tells the machine to close the open trade. So we open a position only if this condition is met.

We compile our strategy, which in this case, will obviously make less than 3,000 trades.

Results and Final Thoughts

If you remember, before we had a profit of about $94,000. Now we are earning slightly less. But as I told you, the number of trades has been reduced by half.

We make the same amount of money but we've reduced the number of trades by 50%, which means that we have doubled the average trade with this single condition.

So as you can see, increasing the average trade is not that difficult and can undoubtedly improve the performance of this bias strategy.

Now let's go and check out the equity line. Please don't pay attention to the abnormal spike that took place around March 2020. As you know, we shouldn’t consider this trade since the market was very volatile in that period, and this could lead to data errors. However, the equity line has clearly improved a lot.

For curiosity's sake, let's also look at the annual period analysis. As you can see, with the condition we added all the years are now in gain.

Of course, this is just a small sample of what we do at Unger Academy. Stop loss, take profit, and maybe some other conditions should be added to increase the average trade even more and make the strategy useful in real trading.

If you want to learn more about the world of systematic trading and how to build these automated strategies, I invite you to check out our free webinar. You can find the link in the description of this video. In this webinar, Andrea Unger, the only 4-time world trading champion with real money, explains step-by-step how to approach systematic trading. 

Also please, if there are any topics that you would like to be discussed in our next videos, please write them down in the comments.

Thank you for watching this video, I really hope that it has helped you. Will see you soon! Bye-bye!

 

Need More Help? Book Your FREE Strategy Session With Our Team Today!

We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.

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Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.