Copper is a non-precious metal which is maintaining its significance alongside gold and silver. It is unique because unlike gold and silver which widely viewed as currency, copper costs far less than both – gold & silver despite it established itself as an economic indicator which tells the state of economic growth. For instance, if the demand for copper is increasing then the economy is expanding and vice versa. Besides, there are several benefits to investing in commodities. For example, many investors who are invested heavily in equities invest some of their capital in commodities to mitigate portfolio risk. Plus, economy and commodity market have a direct correlation. And Copper is one of the important and crucial commodities which tells the overall health of emerging markets.
In India, MCX (Multi-Commodity Exchange) is the commodity exchange which traders can utilize to trade copper in commodities. Here we’re going to discuss the way one can trade in MCX copper in the commodity market. But, before we go any further, let’s discuss what is copper and its applications.
Copper Commodity: Overview & Applications
Copper is the first metal used by humans at least 10,000 years ago. It is a pure shiny, reddish-orange metal element which extracts from ore deposits found underground or opens pit mines. After mining copper, it is separated from waste materials and later refined through the smelting process.
First, it was used to make limited items such as ornaments and coins. But, now it plays a major role in our day-to-day lives. It is also one of the most precious industrial metals and plays a crucial role in the commodity market as a major instrument for many commodity traders. In terms of global consumption, it is the third metal after steel and aluminum. This high consumption made it a product which directly reflects the state of the world’s economy. Its usage in a variety of applications made it an important contributor to the national economies, developing and developed countries.
Copper has similar physical properties as gold and silver which allow us to use copper for a wide array of industrial applications such as electric wiring, plumbing, roofing, and industrial machinery etc. Copper is a very malleable and ductile element which can transform into sheet and wire very easily. It is also a corrosion-resistant element which works as an excellent conductor of heat and electricity.
Recognized as a Bio-Static chemical element, Copper does not affect by the bacteria which made it easy to use it for air conditioning systems and as an anti-germ surface in hospitals.
How to Trade Copper in Commodities?
Unfortunately, in the Indian commodity market, there is only one decent way to trade copper in commodity market i.e. Copper Futures. These are derivative instruments that allow commodity trader to speculate and trade on the future price of copper.
In the Indian commodity market, one can trade copper in MCX (Multi-Commodity Exchange) in instruments: Copper & Copper Mini and NCDEX.
How to Trade Copper Futures?
Copper Futures Trading is not so different from Equity Futures Trading. It’s just in case of copper futures, the buyer is under the obligation of exchange-traded standardized contracts to take a delivery of a specific quantity of copper at a pre-decided price on a future date.
Generally, the copper consumers use copper futures to hedge their cost. On the other hand, the copper producers lock in their selling price by shorting copper futures against the inventory. It is said that one who trades in Copper Futures are certainly active traders who give a considerable amount of time to copper. Copper futures traders have the habit of checking the economic calendar time-to-time. In doing so, most traders look for key economic indicators of copper’s price drivers such as construction industry, interest rate decisions, and gross domestic product (GDP) etc.
Trading copper futures requires a lot of trader’s attention and time. Even leaving position for an hour can have a dramatic effect on the returns of your investment.
How to Trade Copper in MCX? – MCX Copper Futures Trading
As we said earlier, one can trade Copper in MCX through copper futures in instruments: copper & copper mini. On MCX the Copper Futures Contracts are available as per the Contract Launch Calendar with the trading unit of 1 metric ton in Copper futures and 250 kg of trading unit in Copper Mini futures. On futures exchanges, the price of Copper fluctuates in 5 paise (0.05 rupees) increments. This increment is also called “Tick” which is the smallest movement a futures contract can make. So, always remember that how many ticks the price moves away from the entry price determines your net profit or loss.
To initiate the trading in MCX Copper Futures usually depends upon your commodity broker. Whether you are trading in MCX Lead, Zinc or any other metal, you need to close out your positions before the expiry of the contract.
Final Thoughts: –
There is another way to trade Copper in MCX which is Copper Options. But, currently, it is not as well-established as Copper Futures are right now. Besides, the Options bets are only successful only if the price reaches a certain level by the expiration date. For beginner commodity traders, playing in the Options market is very risky. Not only must you be correct with the size but also the timing of the move.
If you are planning to trade copper in MCX then you have to do a proper technical analysis and watch out for certain factors such as USD-INR exchange rates, commodity-specific events, trade policies, and most importantly, supply and demand of copper.
Hope, this article helped you in a way you expected it to be. If you have any query or would like to suggest something then don’t forget to mention in the comment section below.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.