Zinc Trend Follower

Zinc is a base metal like copper, primarily used for galvanizing steel. It's less followed than copper but has strong trends tied to steel production. Unlike gold (safe haven), zinc moves with industrial demand. Zinc trends can be smoother than natural gas but is less liquid than copper.

Daily timeframe is recommended for zinc trend following. It captures meaningful trends while filtering noise. 4H can work for more active trading. Weekly charts provide context. Avoid intraday for trend following - too much noise and zinc isn't as liquid.

Trend following on zinc generates few trades - perhaps 3-6 per year on daily charts. Most of your time is spent waiting for trends or holding positions. This is normal; quality over quantity. Don't force trades when there's no trend.

The hardest part is psychological: accepting many small losses while waiting for big winners. With 35-45% win rate, you'll have losing streaks. The key is trusting that winners will be large enough to offset losses - if you follow the system.

Not required, but helpful for context. The trend following system is technical, but knowing that zinc demand follows steel production and that LME inventory matters helps you understand why trends develop. Technical system works without fundamental knowledge.

Your trailing stop should eventually exit you when trend ends. If ADX drops below 20, be more conservative - tighten stops or avoid new entries. Ranging periods are when trend followers give back profits. Accept this as part of the strategy.

2.5× ATR is a solid default for daily zinc. You can test 2.0-3.0× range. Tighter (2.0×) = more trades, lower win rate, faster exits. Wider (3.0×) = fewer trades, more room, but bigger losses when stopped. Test robustness before changing.

Zinc correlates with copper and other base metals. Don't treat positions as diversified. If long zinc and copper, you're essentially doubling base metal exposure. Limit total base metals to 10% and ensure you can handle if all drop together.

Re-enter if signal still valid (price above MAs, ADX > 25, new trigger). This happens - trends don't move in straight lines. Getting stopped and re-entering is better than holding through major reversal. Accept some whipsaws as cost of protection.

Entry trigger improves timing and defines risk. Entering 'because it's trending' without trigger leads to poor entries and wide stops. Use crossover, pullback, or breakout triggers to define clear entry and stop levels.

Use 5-10 years of daily data covering trending and ranging periods. Split 60/40 for development/validation. Test parameter robustness (EMA 15-25/40-60, ADX 20-30, ATR 2-3×). Expect 35-45% win rate, 2.5:1+ R/R, profit factor > 1.3. Validate out-of-sample.

LME inventory is the key fundamental indicator. Declining inventory indicates demand exceeds supply = bullish pressure supporting uptrends. Building inventory indicates oversupply = bearish pressure. Inventory trends often align with price trends, providing fundamental confirmation.

Risk 1% per trade with position sized by ATR stop distance. This normalizes risk across different volatility regimes. Some practitioners use Kelly Criterion or fixed fractional approaches. Key is consistency and surviving losing streaks that are mathematically certain.

AUD correlates with zinc (Australia is a producer). If you have significant AUD exposure or Australian assets, zinc adds to commodity beta. Consider this when sizing. You might reduce zinc size if already heavily exposed to AUD or Australian mining stocks.

Extended ranging periods kill trend following returns. Also: over-optimization (curve-fitting), changing rules during drawdowns, inadequate capital for proper sizing, taking signals against higher timeframe, and psychological failure to take losses. Stick to rules through difficult periods.