Updated on July 23, 2024

August 8, 2022

Interested in Commodity Trading? Today we will introduce you to one of the metal commodities. And copper. In the article, we will talk about what copper is used for, what is its history, and last but not least, we will look at how you can trade copper. Of course, we will not forget to introduce you to how the value of copper is developing. Because for your copper investments to be successful, you should know how the market is doing.

Copper – properties and uses

It certainly won’t surprise anyone that copper is a metal. That is why we classify it as a metal commodity. For example, together with gold, silver or platinum. However, unlike these elements, copper is not an expensive metal. Nevertheless, it is possible to make money from its trading. It has its typical properties, thanks to which it is widely used in industry.

We classify copper among noble metals . They are characterized by low reactivity and are not subject to corrosion as often. So, simply put, it rusts less often. And this also applies to copper. This is protected against corrosion by a layer of copper, which is gradually formed on the copper. In addition, it is also a good conductor. Excellent conductor of electricity and heat.

Thanks to such abilities, this metal is very often used for the production of electrical conductors. Its electrically conductive properties are used for wiring in houses and apartments. But also in cars, computers and more. Thanks to its thermal conductivity, it is also often used in tinsmithing, in the production of coolers, and it is also used to make dishes. And its corrosion resistance makes it an ideal metal for the production of roofing and accessories. Or perhaps gutters.

Copper and its alloys

And we shouldn’t forget that it serves as one of the materials for jewelry production. But it is not pure copper, but its alloys. If we talk about an alloy of copper and tin, then we mean bronze. You will certainly not be a stranger to bronze. And that’s also because he was significantly reflected in history. This is also evidenced by the fact that he gave the name to a long historical era. That is, the Bronze Age.

Another important copper alloy is brass. Specifically, an alloy of copper and zinc. Brass has the advantage of being quite similar to gold. That’s why it also earned the name cat’s gold. It is used not only for making jewelry. But also, for example, for the production of musical instruments and interior accessories.

History of copper

Copper has been known to mankind for many years. According to archaeological findings, it was already known to people from the Stone Age. However, they were only able to process copper cold. Like, say, silver. The turning point came only around the 6th-5th millennium BC. That’s when these people discovered that metal can be processed even when hot. And that it is possible to make different tools from them. Then they started adding tin to copper and bronze was created. Well, you already know how it turned out. The Bronze Age has arrived. So we can say that the history of this metal is quite important for mankind.

How to trade copper

We have already introduced copper as such. Now to how to trade copper. With precious metals, it is common for investors to purchase their investment bars. For example, gold or platinum. And of course you can use it with copper as well. However, keep in mind that compared to gold for example, copper is quite cheap. So you would have to buy a lot of ingots. And take care of their storage.

The same is true if you decide to trade physical copper on an exchange. In that case, however, you also have to take care of transportation. So this way of trading is more for those who need to own real copper. For example, so that they can make their products from it.

On exchanges, physical copper is usually traded through futures contracts. It is a type of contract, i.e. a contract where two parties agree to exchange a predetermined amount of copper for a predetermined price. And on a predetermined date. So we can say that it is a future trade contract. Both parties thus secure a price that suits them both.

Another option is options trading. Options work similarly to futures. So in a contract, there is a pre-given quantity at a pre-given price on a certain date. However, the difference with futures is that you can change your mind until the given date whether you will actually execute the trade or not.

Copper CFD trading

If you don’t want to worry about storing and transporting copper as such, then you can trade its derivatives. CFDs are most commonly used by individual investors to trade copper. Just choose a suitable broker and then you can trade as you like. The specifics of this type of business is that you are not buying or selling a physical asset. So when you buy a ton of copper, you don’t actually own it.

CFD trading depends on the agreement you make with your broker. You agree to pay each other the difference between the buying and selling price of the copper. It depends on your guess as to who will pay whom. More precisely, on the estimation of the future development of the price level of a specific asset. In this case copper. So whether you make a profit or a loss on your trade will depend on whether or not your estimate of the price movement is correct.

It should all start with your market analysis. Either technical or fundamental. Based on this analysis, for example, you will estimate that the price of copper will rise in the near future. And so you enter a buying position. If, on the other hand, you are convinced that the price will fall, you will enter a sell position. Well, and based on whether your estimate corresponded to reality, you will either earn or lose.

How to begin?

There are a number of brokers that allow you to trade copper and its financial derivatives. You will most often come across brokers where you can trade copper CFDs . There are many of them, so choose carefully. Unfortunately, among CFD brokers you will also find fraudsters, from whom you will no longer receive your finances. And even the non-fraudulent brokers do not all have exactly the same conditions. For some, your investment will pay off better in terms of fees. That’s why it’s a good idea to read reviews on your chosen broker. You can find a number of them on our website.

In addition to choosing the right broker, the key to success in trading is education. Therefore, before you get into trading copper or any other asset for that matter, be sure to educate yourself first. Find out all the possible risks and familiarize yourself with the possibilities of market research. Because if you understand the market, investing will be a piece of cake for you.

Demo account

You can try the market analysis as well as the trading itself on a demo account. This is a free trial account. This is currently offered by the vast majority of brokers. So it is a standard. And if we can advise you, be sure to use this advantage. You can familiarize yourself with the broker and its fees on the demo account. And you can also learn how its trading platform works. And that’s before you even start trading.

A big advantage is also that you can try the trading itself without losing any amount of your own savings. After registering for a demo account, you will be credited with a certain amount. How high it will be depends on the specific broker. Of course, it’s not about any real money. It is only a virtual currency with which you will be able to test how your trading will go.

Even when trading on a demo account, be aware that your speculation on the future development of the copper price level should be based on some rational basis. This means it should be based on your market research. It certainly shouldn’t be a random tip. CFD trading is too risky for that.

Beware of risks

The vast majority of traders who trade CFDs incur a loss on their investments. Contracts for differences are very risky instruments. It doesn’t matter if you trade copper or any other commodity or asset this way. Why? Because with this type of investment you are trading with leverage.

You may also sometimes hear about margin trading. Why margin? Because you are trading on margin. It looks like this. You decide to close any trade. You enter this trade with a certain amount of funds. However, this will not cover the total volume of your order. The rest of the funds needed to enter the copper business will be provided by your broker.

Well, and the ratio of the amount of money you put into the trade and the amount your broker puts into it, you will trade with a different level of financial leverage. This leverage will then be decisive at the moment you exit the given copper trade. As a result of the amount of financial leverage, your profit will multiply. As a result, it will be several times higher.

Sounds good so far, right? But the catch is that just like your profit, your loss will multiply. So you can lose more than you put in the trade. You can make good money that way. On the other hand, it is possible that you will lose all your invested money.

What affects the price of copper

What factors influence the development of the price of copper? The answer is simple. Above all, it is about supply and demand. And related copper mining. The more copper miners produce, the better they meet the demand for it. And its price is thus lower. However, the more its demand exceeds the supply, the higher its value. Currently, it looks like copper supplies are getting thinner. And thus its value increases. However, if another significant deposit were to be found, it would mean a drop in its price for copper.

Copper – current online chart

See how the graph of the development of the value of copper looks like.

Development of interest in the commodity

And how does the value of copper evolve over time? In the case of metals, it is usually the case that their price rises in times of crisis. People stop believing in money and prefer to invest in commodities. But this is especially true for precious metals. The opposite is true for copper. Rather, copper is widely used in industry as an investment metal. And precisely because the industry declines in times of crisis, the value of copper also declines. Its demand is falling. On the contrary, the price of copper tends to be higher in times of boom in the construction and other industries.

Copper – Summary

So can you make money trading copper and its derivatives? He sure can. But you have to find the right timing. As with other assets, it is important to educate yourself and monitor the current market situation when trading copper. Only in this way is it possible to correctly estimate the future development of the copper price level.