Trading copper futures online: how to speculate on the price of copper

Copper has a huge range of applications across industries, which is why traders use it as a benchmark for economic health. Learn how to trade copper futures and copper mining stocks to take advantage of changes in the metal’s price. 

 

What is copper?

Copper is a base metal that is known for being soft, malleable, ductile and highly conductive of both heat and electricity. Due to these properties, it’s widely used in industrial processes across a diverse range of sectors.

Copper, like other metals, has been used for thousands of years as a form of currency, although due to its lower value relative to gold and silver, it’s only made up the smaller denominations – such as the quarter and dime in the US, and one and two pence pieces in the UK.

The main reason for copper’s price differential is that, unlike gold and silver, copper is readily available in far greater quantities.

As copper is used in such large quantities all over the world, its price is often used as a benchmark for global economic health.

Learn about metal trading

What affects the copper price?

The price of copper is primarily driven by supply and demand, but there are a variety of factors that drive both market forces, including:

 

Economic prosperity

During periods of economic growth, development in infrastructure may increase, causing a high demand for copper and therefore pushing up its price. If this high demand for the industrial metal is met with oversupply, the price may fall again.

Conversely, during periods of economic decline, projects that require large amounts of copper may stall, pushing down demand for the metal and hitting its price.

Markets such as China, India and Brazil that have seen strong growth have caused a high demand for copper in recent years.

 

Supply problems

Natural disasters such as earthquakes, human resource issues such as worker strikes, and political influences such as trade wars can affect mining output and supply chains and cause prices to rise.

 

Housing markets

Since copper is a key material in the construction industry, particularly for use in plumbing and wiring, the health of housing markets can be a strong driver of copper prices. If there is a housing boom in a particular territory, there may be a considerable demand for copper. This will often mean an increase in price, particularly if supply cannot meet the required level. 

 

Alternative metals

Alternative metals can also impact the price of copper. After all, if the copper price becomes too high, it may be sensible to choose cheaper materials. In turn, this may have the effect of lowering demand and cause prices to fall.

 

How to trade or invest in copper

There are a few different ways to trade or invest in copper, your choice will depend on whether you want to physically own the metal or speculate on the market price. Here are the main four ways to trade copper online:

• Copper bullion
• Copper futures
• Copper CFDs
• Copper stocks and ETFs

 

What is copper bullion?

Buying and selling copper bars, coins or ingots involves taking ownership of the physical metal. It requires large storage capacity and insurance fees, but can provide a means of diversifying a portfolio away from stocks and other cash investments.

 

What are copper futures?

Copper futures are contracts in which two parties agree to exchange an amount of copper at a predetermined price on a set date of expiry.

If you thought copper would rise in price, you’d enter a contract to buy the metal at the current market price, so that if it did increase, you can buy copper at the cheaper price. But, if the price fell instead, you’d be contractually obligated to buy copper at a more expensive price than the spot price.

Futures contracts are the most common means of speculating on commodity prices across the board and are the benchmark for global copper prices. They’re the most common underlying for other derivative products, such as spread bets, CFDs and options.

This means that copper futures tend to have good liquidity, so it will be comparatively easy to open and close positions at reasonable prices.

Copper futures contracts are standardised for quantity and quality, to ensure that traders know exactly what they’re paying for. However, the contract specifications do vary from exchange to exchange, so it’s important to know what you’re buying and selling.

Learn more about futures

 

COMEX Copper futures

Copper futures are traded on the COMEX division of the Chicago Mercantile Exchange (CME). COMEX does also facilitate the spot trading of high-grade copper, which is the price you’d pay to exchange copper immediately, or ‘on the spot’.

Our Ccpper price is based on COMEX copper futures. The specifications for the contracts are:

Contract size	25,000 pounds
Price quotation	US dollars per pound
Trading hours	24 hours a day from 18:00 Sunday to 17:00 Friday (Eastern Time) – that’s 23:00 Monday to 22:00 Friday (London Time).* There’s a daily 60-minute break from 17:00 (22:00).*
Ticker	HG

 

*Hours will vary between March and November when the UK and US switch to and from daylight savings on different days.

 

LME Copper futures

LME Copper futures refer to grade A copper traded on the London Metal Exchange, which is priced per tonne. You can also trade LME Copper on the spot. The contract specifications are:

Contract size	25 tonnes
Price quotation	US dollars per tonne
Trading hours	LMEselect (electronic platform) is open from 01:00 – 19:00 (London time). The LME’s Ring trading open outcry floor trades from 11:40 – 16:50 (London time).
Ticker	CA

 

What are copper CFDs?

Copper contracts for difference (CFDs) enable you to speculate on the real-time copper futures price, and are always cash settled – so you’ll never have to worry about physical delivery. Our copper CFD market is priced using COMEX futures.

When you trade copper futures with us, you’ll be doing so via CFDs. You’d open a position to buy copper if you thought the price of futures would rise – this happens when demand outstrips supply. Conversely, you’d open a position to sell copper if you thought that futures prices would fall, due to supply outweighing demand.

Learn what CFD trading is and how it works

The profit on your CFD position would depend on whether your prediction of copper price movements was correct and the extent to which the market price moved in your favour. If the market moved against you, your CFD position would result in a loss.

CFDs make use of leverage – a mechanism that enables you to put down a small initial deposit to gain full market exposure. While leverage can magnify your profits, it can also magnify your losses, so trading with CFDs requires a full risk management strategy.

Learn how to manage your risk with City Index.

 

What are copper stocks and ETFs?

Copper stocks are the shares of companies that are involved in the industry, whether that’s the exploration, mining, development or production of copper. Examples include Fortescue Metals, BHP Group and Freeport-McMoRan.

Copper stocks don’t have a straightforward relationship with the price of the metal, as other factors impact share prices, such as company fundamentals and breaking news. It’s important to do your research and assess which shares are right for your strategy before taking a position.

Learn more about share trading

Copper exchange traded funds (ETFs) are another popular means of trading the metal. There are broadly two types of copper ETFs: funds that track the futures price, and funds that track a basket of copper stocks. Both present a way of getting a broader exposure to the market from just a single position.

Learn what ETF trading is and how it works

 

How to trade copper with City Index

Trade copper with City Index by following these simple steps and kickstart your market experience today.

1. Learn how to trade
   Find out how derivative products work and the benefits of trading
2. Create an account with City Index
   Open a live account, or practise trading first in a risk-free demo account
3. Find the copper market you want to trade
   Use our award-winning platform to search for copper, or copper-linked stocks and ETFs
4. Decide whether you want to go long or short
   Click ‘buy’ if you think the market will rise in price, and ‘sell’ if you think it will fall
5. Open your position
   Enter the market by clicking ‘place a trade’, you may want to consider adding a stop loss to your trade to manage your risk
6. Monitor and close your trade
   Use analysis to stay up to date with any price movements and identify an exit point for your position

 

Trade copper on MT4

With City Index you can also trade copper on MetaTrader 4 (MT4). This is an electronic trading platform that offers integrated insights and account management features. The platform also offers free EA hosting capabilities and web and mobile trading support.