Adaptive - Revert at extremes, confirm momentum at crossovers
| Strategy Type | Mean Reversion / Momentum Confirmation |
| Market Outlook | Adaptive - Revert at extremes, confirm momentum at crossovers |
| Risk Profile | Moderate Risk (RSI filters reduce false entries) |
| Reward Profile | 1.5:1 to 2:1 Risk-Reward typical |
| Time Horizon | Short to Medium-term (Days to Weeks) |
| Iv Environment | Works across volatility environments with parameter adjustment |
| Breakeven | Entry Price ± Spread + Slippage |
| Primary Instruments | Lead CFDs through MAS-licensed brokers; LME Lead 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 RSI trading (no expiry complications) |
| 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 |
RSI (Relative Strength Index) measures momentum - the speed and magnitude of recent price changes. It ranges 0-100, with > 70 indicating overbought and < 30 oversold. It helps identify potential reversal points and momentum shifts.
In strong trends, RSI can stay overbought or oversold for extended periods without price reversing. A reversal candle confirms actual turning. This filters false signals where price continues despite extreme RSI.
RSI 50 is equilibrium. Above 50 = gains exceeding losses (bullish momentum). Below 50 = losses exceeding gains (bearish momentum). Crossing 50 signals momentum shift.
Standard 14-period RSI with 70/30 levels works well for lead. Lead's lower volatility means standard settings are effective. Use 4H or Daily timeframe for reliable signals.
Risk 1.5% per trade maximum. Use 2× ATR stop. Position = (Account × 1.5%) / (2 × ATR). Lead's lower ATR may allow larger position but respect portfolio limits.
Divergence: price and RSI disagree. Bullish divergence: price lower low, RSI higher low. Bearish divergence: price higher high, RSI lower high. Wait for price confirmation before entering. Divergence often precedes lead reversals.
Daily RSI sets bias (> 50 favor longs, < 50 favor shorts). Take 4H signals aligned with Daily. Strongest: both timeframes at same extreme. Conflicting timeframes warrant caution or skipping.
Bull regime: RSI operates 40-75, use 40 oversold. Bear regime: RSI operates 25-60, use 60 overbought. Ranging: standard 30-70. Identify regime before applying RSI.
RSI fails to reach previous extreme. After oversold, RSI bounces, pulls back but makes higher low (doesn't reach previous low), then breaks higher. Shows momentum shifting - powerful reversal signal.
Auto industry data (China vehicle sales) can push RSI to extremes. Post-data extremes often mean revert. Wait 2-4 hours for reaction to settle. Confirming auto data strengthens RSI signals.
Calculate RSI using gains/losses over 14 periods. Signal logic: mean reversion at < 30/> 70 with candle confirm, momentum on 50 cross with ADX > 20. Divergence: compare price and RSI swing points. Test across auto industry cycles.
Buy calls at oversold, puts at overbought for defined risk. Use 21-30 DTE for mean reversion, 30-45 DTE for momentum (lead is slower). Credit spreads collect premium at RSI extremes. LME options exist but less liquid.
Bull: RSI operates 40-75, adjust oversold to 40. Bear: RSI operates 25-60, adjust overbought to 60. Ranging: standard 30-70. Identify regime using ADX, 200 MA, and auto industry trend.
Compare RSI across lead, zinc, auto sector. Aligned oversold = higher conviction long. Divergence (lead oversold, zinc not) = investigate cause. Auto sector RSI often leads lead RSI.
Lead RSI: 10-15% of commodities allocation. Max 2-3% total lead exposure. Track by signal type. Manage correlation with zinc RSI (often correlated).
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