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BOOK YOUR FREE STRATEGY SESSION NOW >>Portfolio diversification is one of the most powerful weapons in a systematic trader's arsenal. In fact, having strategies based on different approaches can help us to better manage any changes in the characteristics of the markets.
Let's think, for example, of the Gold future, which in recent years has developed mean reverting characteristics due to a significant increase in liquidity.
As we know, usually Gold and, more in general, all metal futures respond well especially to trend-following strategies.
However, thanks to the changes just mentioned, today you can get very interesting results on Gold futures also with reversal strategies.
In this video, you’ll learn about a very useful strategy for diversification that will allow you to take advantage of the mean reverting characteristics of this market.
In addition, we'll also talk about another strategy for the metals sector. This is a classic trend-following strategy on Platinum, a minor market which, however, offers a greater downward scalability compared to gold.
Watch the video to discover how these strategies are structured and what kind of real performance they offer!
Enjoy!
Hey everyone! One of the coaches at Unger Academy here and welcome back to our usual chat on the strategies in our portfolio that have performed the best over the last period.
Okay, so this week we're going to be talking about the metals market, which is a particularly well-known and also very liquid sector. The star of this sector, as you know, is Gold, namely the Gold Futures market. But other futures also belong to this sector, such as Platinum, which we're going to be talking about later, and also see a strategy on it, but also Silver, for example, and Palladium, which is a much smaller market than those just mentioned, which trades very few daily contracts and has a very extreme volatility. So, I recommend it only to those who are really expert on trading these futures with automated systems.
So let's start with the first strategy we're are going to be seeing today. This strategy works on the Gold Future and was developed on a 15-minute timeframe. It's an intraday strategy, which means that all the trades are closed at the end of the day. As in this case here, the positions are closed a few bars before the end of the session.
And as you can already see from the type of entries it makes, this is a reversal strategy. So it waits for a false breakout on the level of the high or the low of the previous day, depending on whether the entry is short or long, in order to enter into the market. So, we wait for a breakout, as happened here in this case, of the previous day's high, and after that the market pretended and went back. You see it, it rebounded back below the previous high and as a result the strategy went short.
As for the long side, instead, the long trades are opened at the breakout of the low of the previous session.
Here’s the equity line of the strategy. As you can see, it has performed very well indeed, which is very interesting if we consider that Gold is purely a trend-follower market, just like all metals really
However, also due to the expansion of this market and the overflow of liquidity that has taken place in the gold market over the last 5-6 years, it has begun to show some mean-reverting characteristics. Because clearly, the more a market is liquid and has many traders involved, the more difficult it will be to manipulate it in any way, or to see very strong breakouts, because on all levels there are probably very large quantities of contracts that stop large price movements.
Despite this, there are still a lot of trend-following years, but in the last few months it seems that the reversal type is starting to pay off.
So with a view to diversification, it certainly would be highly beneficial to develop both a trend-following strategy, which we know works very well in the Gold market, and also a reversal strategy such as this one that can protect us and our portfolio when the market does not break up, and consequently the trend-following strategies may suffer.
Let’s move on to the next strategy, which as I mentioned before, has been built for the Platinum market. So, a future that is certainly smaller than its predecessor.
You can see that now, at 9 am Central European Time, it's traded around 2,000 contracts, so certainly not huge amounts. But, in any case, it's a very scalable market because it has a Big Point Value of only $50, so half as much as Gold, for example. And like Gold and other metals, it responds well to trend-following strategies.
In this case, we'll enter at the breakout of a price channel built on 60-minute bars. To enter long we'll wait for the break of a 6-period channel, namely the highest high of the last 6 bars. While instead for the short, we'll wait for a slightly less "reliable" confirmation, from a certain viewpoint, because the breakout will be based only on the last 2 bars.
We can see that this strategy has performed very well. So, as you can see, reversal and trend-following strategies on different markets can perform well over the same period and this is a very positive thing.
The average trade is quite large, $142, especially if we consider that the value of this market is not that large.
So, guys, it's now up to you to try and build this kind of strategies yourself. You'll see that you can obtain excellent results.
And if there is anyone among you who are interested in the world of systematic trading, I suggest that you click on the link in the description below. From there you can watch a video of Andrea Unger, or get our best-selling book by only covering the shipping costs, or book a free call with a member of our team.
If you liked the video, please leave us a Like, subscribe to our channel and click on the notification bell to stay updated on the release of all our new videos.
And with that, we'll see you on our next video. Until then, bye bye!
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.
BOOK YOUR FREE STRATEGY SESSION NOW >>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.
