Zinc Trend Follower

Zinc is an industrial metal primarily used for galvanizing steel (60% of use). It's the fourth most used metal globally. Trading zinc offers exposure to industrial demand cycles, particularly China's construction sector. It's less volatile than copper or nickel, making trends more manageable.

Use 10-period fast MA and 30-period slow MA for signals on Daily timeframe. Also use 200 MA for major trend context. These settings balance signal timing with reliability for zinc's moderate volatility.

ADX filters out signals during ranging markets where crossovers whipsaw. Only take signals when ADX > 25, indicating a genuine trend exists. Zinc can consolidate for weeks - ADX prevents losses during these periods.

Zinc's primary use is galvanizing steel to prevent rust. This means zinc demand is directly tied to steel production and construction activity. Rising steel demand typically leads to rising zinc demand. Watch steel and iron ore prices for zinc direction clues.

Risk 1.5% of account per trade maximum. Use 2× ATR stop, which is tighter than more volatile metals. Position size = (Account × 1.5%) / (2 × ATR). Full size when aligned with 200 MA, half size when counter.

The 200 MA provides major trend context. Signals aligned with 200 MA (e.g., golden cross above 200 MA) get full size (1.5% risk). Counter-trend signals (golden cross below 200 MA) get half size (0.75% risk). This manages risk while still trading valid signals.

LME inventory shows supply/demand balance. Falling stocks = bullish (demand > supply). Rising stocks = bearish (supply > demand). Use as trend confirmation: trend signal + confirming inventory = higher conviction. Conflicting inventory = reduced conviction or skip.

Use weekly chart for trend bias (which direction to trade), daily for signals (when to enter). Only take daily signals aligned with weekly trend. Weekly uptrend = only daily golden crosses. Weekly downtrend = only daily death crosses. Alignment improves win rate significantly.

Zinc trends often pause and consolidate (ADX falls). If stop not hit, hold through consolidation. Don't exit just because ADX falls. Exit only on stop trigger or opposite crossover. Consolidation often precedes trend continuation.

China PMI (manufacturing health), China industrial production, China fixed asset investment (infrastructure spending). Also watch US dollar (inverse correlation). LME inventory reports provide direct supply/demand data. Don't enter new trades just before major China data.

Calculate SMA(10), SMA(30), SMA(200), ADX(14). Long signal: MA(10) > MA(30) crossover AND ADX > 25. Size = full if price > MA(200), half if below. Exit on opposite crossover, trailing stop, or 25-day time stop. Test across multiple economic cycles including China policy shifts.

Buy calls on golden cross, puts on death cross for defined risk. Use 45-60 DTE for trend trades. LME zinc options exist but less liquid - consider copper options as correlated proxy. Spreads reduce cost (bull call spread, bear put spread).

Steel/iron ore (galvanizing demand), copper (often leads zinc), China Yuan (economic health indicator). Also: zinc/copper ratio for relative value. Zinc signal + confirming correlations = higher conviction. Diverging correlations = caution.

Bull regime: ADX > 25, rising 200 MA, falling LME stocks, China PMI > 50. Bear regime: ADX > 25, falling 200 MA, rising LME stocks, China PMI < 50. Consolidation: ADX < 20, flat 200 MA. Adapt strategy to regime - avoid trend following in consolidation.

Zinc trend: 10-15% of metals allocation. Max 3% total zinc exposure. Manage correlation with copper (often correlated - don't double up). Maximum 1-2 concurrent zinc positions. Track performance by regime and 200 MA alignment.