Best Nickel Trading Strategies and Tips

WHAT IS NICKEL AND WHAT IS IT USED FOR?

Trade smarter – Sign up for the DailyFX newsletter

Receive timely and compelling market commentary from the DailyFX team

Subscribe to the newsletter

Nickel or Ni (atomic symbol of the periodic table) is a silver/white metal which is often used as an input in the manufacture of countless secondary products. Listed at number 28 of the periodic table, nickel has exceptional properties including its resistance to corrosion, ferromagnetic (magnetic), its ductility, its recyclability, its quality as a good conductor of electricity as well as a high boiling point (2 913°C) and melting (1455°C). C) dots. Some notable uses include coin making, steel, strengthening other materials in the aerospace industry, wiring, alloys, and renewable energy.

Nickel is mainly found and mined in Indonesia, South Africa, Australia, Russia and Canada respectively. Together these countries account for around 50% of the world’s nickel supply and should be given particular attention when it comes to trade, as supply factors, as with most commodities, can have an impact on the price of nickel.

NICKEL TRADING HOURS AND EXPOSURE

LME Selection: 01:00 – 19:00 (trading for the precious LME continues until 20:00) (UK time)

Ring trading: 11.40am – 5.00pm (UK time)

Inter-office telephone negotiation: 24 hours

Nickel trading is not limited to physical purchases (bullion) but via multiple avenues where traders can gain exposure to price movements. Futures contracts on exchanges such as the London Metals Exchange (LME) are commonplace among institutions, but for the retail trader, contracts for difference (CFDs) are a popular choice. CFDs are accessible worldwide through many brokers offering nickel trading (both spot and futures), but it is recommended that you understand contract specifications, leverage and broker security before proceeding. embark on this path. Stock market hedging of nickel remains the most popular method for retail investors with stocks such as Vale SA, Nornickel, Glencore, BHP, Anglo American and South32 topping the list.

Recommended by Warren Venketas

Get your free stock forecast

WHAT AFFECTS NICKEL PRICES?

SUPPLY AND DEMAND

As briefly mentioned above, supply and demand greatly influence nickel prices. Economic theory suggests that limiting supply leads to higher prices and vice versa, while the same logic applies to demand (i.e. an increase in demand should lead to an increase nickel prices). Global nickel stocks can be monitored on the LME website, while Chinese stocks also play an important role in nickel price developments.

GOVERNMENTS

Governments involved in nickel (import or export) can influence prices through government intervention. An example is Indonesia’s ban on nickel exports.

GEOPOLITICS

Geopolitical tensions, particularly regarding large nickel producers, could cause prices to fluctuate significantly. Recently, the Russian invasion of Ukraine has disrupted supply chains, leading to a marked increase in the price of nickel.

CHINA

China is the world’s largest consumer of nickel in its various forms, and a slowdown or rise in the Chinese economy traditionally reflects a positive correlation with the price of nickel. China is arguably the most important demand factor for nickel prices. Therefore, emphasizing Chinese economic and political data is crucial for the success of nickel trading.

In reality, most of the above factors are intertwined and will act in accordance with traditional supply and demand levers, making it one of the most important aspects of nickel trading.

Fundamental knowledge of trading

commodity trading

Recommended by Warren Venketas

WHY TRADE NICKEL?

Nickel’s place in the global commodity market is gaining momentum in terms of ease of use in growing industries. Since the price of nickel is in US dollars, the commodity also serves as a hedging tool against a weaker greenback coupled with a rising inflation. Additionally, when global markets are on the rise (bull market), nickel trading can be a great way to capitalize on increased demand, as nickel prices are likely to rise.

Finally, diversifying one’s investment portfolio is often encouraged by market experts and nickel can certainly have a place among more common types of investment such as stocks or bonds.

NICKEL TRADE: STRATEGIES

With nickel prices being so dependent on fundamental drivers, technical strategies are often seen as secondary support for trading decisions, which is why it may be wise to employ a more mixed approach using both techniques. The examples below examine each strategy separately to better highlight their respective advantages and disadvantages.

TECHNICAL TRADE

From a technical business perspective, using indicators and price action techniques can be successfully implemented when trading nickel. Because there are endless combinations of technical methods, I have selected a simple but effective method to illustrate the adaptability of technical trading in markets like nickel which are not traditionally tied to technical analysis.

DAILY NICKEL CHART

Chart prepared by Warren Venketas, IG

The table above includes a 200 day simple moving average (SMA) in gray with Relative Strength Index (RSI). Using the SMA as a reference for the directional bias (above the SMA = bullish; below the SMA = bearish), we can use the SMA in this case as a support zone for possible long positioning highlighted by the boxes grey. A move below the SMA will ultimately invalidate the move and proper risk management will be required to avoid any adverse effects. price action. If the market is moving in the desired direction (up in this case), then the RSI can be used to close by correlating the price with an overbought indication (blue). This simple strategy is just one of the technical tracks that can be practiced in the nickel market.

THE FUNDAMENTAL TRADING AND THE NICKEL SHORT SQUEEZE OF 2022

If we look at the nickel chart since 2015, nickel has been somewhat constrained between the $10,000 to $20,000 levels. In early 2022, when Russia invaded Ukraine, the price of nickel began to climb as a disruption in Russian nickel exports impacted supply factors. With a major producer largely off the global register, supply issues piled up and continued to drive up the price of nickel. Along with the invasion, a massive short position was placed by a Chinese trader (Xiang Guangda, Tsingshan Holding Group Co). It remains unclear whether this positioning was purely for hedging purposes (to offset losses due to falling physical commodity nickel prices) or simply for speculative purposes, but the result has been catastrophic for the gold markets. nickel. What followed was a short press pushing nickel prices above $100,000 per tonne (see chart below) triggering the LME to stop nickel trading!

250% NICKEL PRICE APPRECIATION IN JUST OVER 24 HOURS

image2.PNG

Source: Bloomberg

DAILY NICKEL CHART

Graphical user interface, graphical Description automatically generated

Chart prepared by Warren Venketas, IG

Monitoring fundamental drivers, whether it’s supply disruptions from the world’s largest producers or staying in touch with demand-side constituents like China, can go a long way in making rational decisions on the future nickel prices. Fundamentals can be used in conjunction with technical analysis, but fundamental drivers generally indicate a longer-term outlook and do not lend themselves to short-term strategies.

Introduction to Technical Analysis

Exchange the news

Recommended by Warren Venketas

RESOURCES TO HELP YOU TRADE NICKEL

Commodity markets often have mutual economic stimuli, so keeping abreast of the latest news outside of nickel can help nickel traders create an all-encompassing overall picture. Some markets to consider include copper and crude oil which often serve as a barometer of global growth. For those interested in teaching commodities trading, the DailyFX Commodities The segment contains everything you need to know about the fundamentals and basics of commodity markets.

element inside the

element. That’s probably not what you wanted to do! Upload your application’s JavaScript bundle to the item instead.

Comments are closed.