Multi-Commodity Rotation

Rotation concentrates capital in the strongest performers, avoiding persistent losers. Buy-and-hold includes laggards that drag down returns. Rotation captures momentum - winners tend to keep winning for extended periods.

Top 3 is recommended. This provides concentration in leaders while maintaining some diversification. Top 2 is more concentrated (higher risk/reward). Top 4-5 approaches a basket (more diversified, less alpha from selection).

Execute within the first week of the month. Exact timing is less important than consistency. Avoid rotating mid-month as this loses the systematic approach. If you miss by more than a week, wait for next month.

Yes, but with considerations. With A$20,000+, you can implement 3 commodity positions meaningfully. Below A$10,000, position sizes become small. Consider fewer positions (top 2) or start with paper trading.

63 days (~3 months) captures meaningful trends while filtering short-term noise. Shorter periods (21 days) create more whipsaw; longer periods (126+ days) may be too slow to capture momentum shifts.

Dual momentum requires positive absolute momentum (ROC > 0). In commodity crashes (2008, 2020), all commodities have negative ROC. The system moves to cash rather than holding falling assets, significantly reducing drawdowns.

Consider limiting to max 2 from same category. If gold, silver, and copper all rank top 3 (all metals), you have concentrated sector exposure. Forcing one energy or agriculture maintains some diversification.

Monthly rotation (not weekly) reduces trades. Skip rotation if rankings are very close (rank 3 vs 4 difference minimal). Use competitive broker with tight spreads. Accept that some costs are the price of capturing momentum.

London session (6 PM - 2 AM AEST) has best liquidity across commodities. Execute closes first, then opens. Avoid Asian-only hours for metals or US-only hours for energy. London overlaps provide access to all markets.

Yes. Core rotation handles tactical allocation. Individual strategies (RSI, breakout) can time entry/exit within rotation holdings. For example, wait for RSI oversold to enter a new rotation position.

Use adjusted continuous contracts that roll properly. Avoid using spot prices directly as they don't reflect trading reality. Test 10-20 years to capture multiple commodity cycles. Include 2008 and 2020 to test crash protection.

Research suggests 3-12 month lookbacks work for commodities. 63 days (3 months) is robust. Test across 42-126 days for your specific universe. The strategy should work across this range, not just one setting.

Macro filters (PMI, yield curve, DXY) adjust allocation size based on environment. In recession signals, reduce total allocation. In growth regimes, maintain full allocation. This adds a strategic layer to tactical rotation.

Target Sharpe > 0.5, ideally > 0.7. Rotation is more concentrated than a basket, so slightly lower Sharpe than diversified approaches is acceptable if returns are higher. Compare to equal-weight benchmark Sharpe.

Audit total commodity exposure: ASX resources + Super + AUD correlation + rotation. If already >10% in commodities indirectly, consider smaller rotation allocation. Total shouldn't exceed 15-20% including all sources.