What is copper trading? A complete guide

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What is copper?

Copper is an industrial metal known for its high electrical conductivity, durability, and corrosion resistance. It plays a vital role in industries such as construction, electronics, and renewable energy. For traders, copper offers opportunities to speculate on price movements driven by global supply-demand factors, such as infrastructure projects, mining disruptions, and economic growth.

Copper’s price is often seen as a barometer for global economic health, making it a popular asset among traders. Copper is primarily traded on commodity exchanges like the London Metal Exchange (LME), the Chicago Mercantile Exchange (CME), and the Shanghai Futures Exchange (SHFE). These exchanges set global benchmark prices for copper and offer futures and options contracts, allowing traders to speculate on copper prices or hedge against price fluctuations.

What affects the copper price?

Copper’s price is influenced by a range of factors, primarily global supply and demand, which are driven by elements such as economic growth, geopolitical events, and demand in key industrial sectors. These drivers can influence your fundamental analysis of this and other markets, helping you understand how price might move. Learn more about the role of news and analysis in refining your strategy.

• Supply and demand: Copper prices are heavily impacted by the balance between global supply and demand. Factors like mining output, the availability of reserves, and labour strikes can reduce supply, pushing prices higher. Conversely, new mines or increased production can increase supply and lower prices.
• Economic growth: Copper is widely used in construction, infrastructure, and manufacturing, making its price closely tied to the global economy. When economies grow, copper demand rises, leading to higher prices. During economic slowdowns, demand decreases, leading to lower prices.
• Industrial demand: Copper is essential in sectors such as electronics, renewable energy, and electric vehicles. Demand from these sectors can drive prices up, especially with the growing shift to green technologies, which has increased the need for copper in solar panels and wind turbines.
• Geopolitical events: Tensions or political instability in key copper-producing countries like Chile and Peru can disrupt supply, causing price spikes. Trade policies, tariffs, and export/import restrictions also influence the copper market.
• Substitution and recycling: Advances in recycling technologies or the use of substitute materials can reduce demand for virgin copper, affecting prices. However, copper’s unique properties, such as its conductivity, make it difficult to fully replace in many industrial applications.

What are the copper trading hours?

Copper trading hours vary depending on the exchange. For example, on the London Metal Exchange (LME), copper futures trading runs from 1:00am to 7:00pm UTC*, Monday through Friday. Other platforms offering CFDs or spot trading on copper may have different schedules, so it’s important to confirm the trading hours specific to your platform in UTC. These nearly 24-hour market hours give traders the flexibility to react quickly to global events as they unfold.

Trading hours may differ depending on national holidays and daylight savings time.

How to trade copper

While copper can be traded directly on exchanges like the London Metal Exchange (LME) through physical contracts, it can also be traded using leveraged instruments like CFDs (contracts for difference) using a broker like Capital.com. If you think the price will rise, you can take a long position, or if you think it will fall, a short position, based on your market outlook.

When trading a derivative like a CFD, you’ll need to assess the physical drivers of price like fundamental analysis, technical analysis, or both, to make sense of price action and determine which direction you think the market will move. You might choose to day trade, opening and closing numerous positions within a day, or swing trade, using a timeframe of days to weeks. You can also set stop-loss and take-profit orders as part of a risk management strategy.

Trading copper on the spot market

When trading copper on the spot market, you are trading at the current market price (the spot price) for immediate settlement. This involves speculating on the present price of copper, which is influenced by supply and demand. You can trade CFDs based on the spot price, allowing you to take long or short positions with leverage without owning the physical asset.

Trading copper with futures

Futures contracts involve an agreement to buy or sell copper at a predetermined price on a specified future date. These standardised contracts are traded on major exchanges like the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME). Copper futures allow traders to speculate on price movements without owning the physical asset, making them a popular tool for both hedging and speculation in the copper market.

Why trade copper with CFDs?

Trading copper with CFDs offers several advantages. CFDs allow traders to speculate on copper price movements without owning the physical asset, offering flexibility and lower upfront capital requirements. With leverage (also known as margin trading), you can control larger positions, potentially amplifying profits (though it also increases risk).

CFDs also allow you to go long or short, enabling you to benefit from both rising and falling markets. Additionally, copper CFDs provide access to global markets without the logistical challenges of physical delivery.

Learn more about CFD trading.

Copper trading strategies

Examples of basic copper trading strategies include range trading and breakout trading. These strategies rely on technical analysis, which explores historical price patterns in an attempt to understand potential future moves. Technical strategies may use tools such as RSI, MACD or Fibonacci retracements to assist in determining potential entry and exit points.

However, it's equally important to consider fundamental drivers of copper prices, such as economic data releases, manufacturing reports, and geopolitical events. These can significantly impact supply and demand, often driving market direction. For example, if data suggests a rise in industrial demand or supply disruptions in key copper-producing regions, it may signal an upward price movement, providing traders with insight beyond the charts.

You can keep up to date with upcoming fundamental market developments with our news and analysis, as well as our Week Ahead newsletter.

Breakout strategy example

Suppose copper is trading at $4.00 with support at $3.95 and resistance at $4.20. A breakout strategy would involve placing a buy order above $4.20, expecting prices to surge once resistance is broken. If the price breaks through, a potential target could be $4.50. Conversely, if the price breaks below support at $3.95, a short trade could be placed below this level, aiming for a potential drop to $3.70.

Range trading example

If copper is fluctuating between $3.95 and $4.20, a range trading strategy would involve buying at support near $3.95 and selling near $4.20. Traders can profit from the repetitive price movements within this range, placing stop-loss orders just below support and above resistance to limit risk.

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