Directional - Follow established aluminium trends
| Strategy Type | Trend Following |
| Market Outlook | Directional - Follow established aluminium trends |
| Risk Profile | Moderate Risk (Aluminium has lower volatility than most base metals) |
| Reward Profile | 2:1 to 3:1 Risk-Reward in trending conditions |
| Time Horizon | Medium-term (Days to Weeks) |
| Iv Environment | Best in trending markets with ADX > 25 |
| Breakeven | Entry Price ± Spread + Slippage |
| Primary Instruments | Aluminium CFDs through MAS-licensed brokers; LME Aluminium Futures via futures brokers |
| Mas Compliance | MAS regulated; retail trading permitted with licensed broker holding CMS license |
| Contract Size | LME: 25 metric tonnes per contract; CFDs vary by broker (typically 1-25 tonnes) |
| Trading Hours | LME: 3 PM - 1 AM SGT (Ring trading subset); CFDs nearly 24 hours |
| Expiry Options | CFDs preferred for trend following (no expiry); LME futures require roll management |
| Settlement | Cash settlement for CFDs; physical delivery for LME futures (close before prompt) |
| Tax Treatment | No capital gains tax for individuals in Singapore; trading income may be taxable if deemed business |
| Stamp Duty | No stamp duty on commodities derivatives |
| Cdp Account | Not required for commodities; trading account with licensed broker sufficient |
Aluminium offers lower volatility than copper or nickel, making it suitable for trend following with tighter stops. Strong fundamental drivers (energy, China) create persistent trends. Good diversification within base metals.
Use 10-period fast MA and 30-period slow MA on daily timeframe. Also use 200 MA for major trend context and position sizing. ADX(14) filters for trending conditions (> 25).
Use 1.5% risk per trade (standard) when signal aligns with 200 MA. Use 0.75% for counter-trend signals. Stop at 1.5× ATR from entry. Total aluminium exposure max 3%.
Aluminium smelting is extremely energy-intensive, with electricity representing 30-40% of production cost. High energy prices raise the aluminium cost floor and can cause production cuts, reducing supply.
Critical - China produces ~60% of global aluminium and consumes ~55%. China policies on production caps, power rationing, and exports significantly move global prices. Monitor China PMI and policy news.
200 MA shows major trend. Crossovers aligned with 200 MA (golden cross above it) have higher probability and get full size. Counter-trend crossovers get half size. Alignment significantly improves win rate.
Track European natural gas and electricity prices. Rising energy + bullish aluminium crossover = higher conviction (cost support). Falling energy + bearish crossover = higher conviction (cost floor declining).
Weekly chart sets major trend bias. Only take daily crossovers aligned with weekly. Weekly uptrend (price > weekly 20 MA) + daily golden cross = strongest signal. Conflicting timeframes = reduce size or skip.
After 1× ATR profit, move stop to breakeven. Then trail at 1.5× ATR from favorable price. Alternative: trail at 30 MA. Hold through consolidations if stop not hit. Scale out 50% at 2× ATR profit.
China production cuts reduce global supply, supporting prices. Environmental limits, power rationing, or policy caps on production are bullish catalysts. Combine with bullish crossover for high conviction long.
Calculate MA(10), MA(30), MA(200), ADX(14), ATR(14). Long: MA(10) crosses above MA(30) AND ADX > 25. Size: full if above MA(200), half if below. Exit: opposite crossover or 1.5× ATR trailing stop. Test across energy regimes.
Buy calls on golden cross, puts on death cross. Use 45-60 DTE minimum (aluminium trends develop slowly). Spreads reduce cost. LME aluminium options available with reasonable liquidity. Defined risk essential.
Bull regime (rising energy, growth): favor longs, standard parameters. Bear regime (falling energy, recession): favor shorts. Consolidation (ADX < 20): avoid trend following. Identify regime before trading.
Monitor energy (production costs), copper (sector leader), and dollar (inverse correlation). Aluminium crossover + confirming energy + confirming copper = high conviction. Divergences warrant investigation.
10-15% of metals allocation. Max 3% total exposure. 1-2 positions maximum. Manage correlation with copper (often correlated). Track performance by regime and 200 MA alignment.
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