Trade Ideas

Want A Potential 6.7% Return? Trade In Platinum

By Rob on January 24, 2018

Reading Time: 2 minutes

Who doesn’t love the bling and sparkle that platinum can bring to our lives? Not only is a gorgeous metal to use in jewellery, it’s actually also a great metal to follow and trade on. Why trade in platinum? It’s because over the past almost two years it seems to have kept fairly true to form, and if you like trading with patterns as evidence for what you’re going, then a trade in platinum will be right up your street.

Platinum Is Interesting

Platinum is certainly interesting when you look at it on the weekly timeframe. The false breakout is clearly there, and that’s what really sparked our interest. A false breakout is when a trade looks entirely set to move in one direction, and then it changes. Novice traders aren’t keen on false breakouts – they can stop their trades too early. However, those who have seen it all before can use them to their advantage, and when the newbies have pulled out, they can keep going for a better return. As well as the false breakout, we’ve noticed the completion of an A, B, C, D pattern. This pattern looks like a lightning bolt, and it’s the bolt of information that we need to know that a trade can work.

Fundamentals Are Important

When you’re trading in platinum, as with anything, the fundamentals of those trades are extremely important. As you can see with this particular trade, we have them all on our side. We looked to the past and saw how bullish platinum had been, rising – rocketing – over a number of months. Then we saw how it settled down, bobbing here and there but generally enjoying a calm wave of movement. Then there was a false breakout, which meant we could get ready to trade in platinum and really do well. Having all of these things in place meant that we understood where the trade was most likely going, and we could prepare for it.

Play To The Season Average

Looking back to January 2017, we see a big rise. It happened the year before too. And both times it settled into a great reward to risk ratio. This is good information to have because it means, if the trade in platinum remains true to form, January 2018 will also have a fantastic reward to risk ratio – it should be an easy gain of 13 percent (if we risk 2 percent, which, of course, we did).

Platinum Or Gold?

It’s best not to trade too much in metals at one time, so we recommend that you pick either a trade in platinum, or one in gold. The rewards should be good each time, but because precious metals tend to be linked, if one goes down they all will. Yes, the gains could be great, but the losses could be big, and might just be too much risk. It’s your choice, of course, but we would stick with one or the other, just to be safe(r).

How We Did It

In this case, we chose to trade in platinum because of all the signs that pointed us in that direction; the A,B,C,D pattern, the false breakout, and the historical evidence too. We plotted our stop loss just below the low point, and our order at the break of the high we spotted last week. It was a safe, calculated trade to make.