Copper is often called Dr. Copper in the financial markets. Every home, car, cell phone, computer, television and industrial machine tool requires significant amounts of copper to function. Thus, copper is one of the best indicators for the health of economies worldwide.
If an investor learns how to trade copper successfully, then they have, by default, learned how to spot trends early for other financial markets.
Most of the world’s top investors watch copper carefully. While major investors can trade copper on commodity exchanges, more often than not, smaller investors will trade copper on stock exchanges. ETF’s now offer exposure to copper prices through either mining companies or direct futures and options bundled into exchange traded funds.
This means that the wise investor can move from one sector to another that are known to rise and fall in a certain order. For example, when copper prices fall, this typically means that oil stocks will also fall, and consumer staples or high-yielding bonds will be a better place to invest.
These patterns take time to understand but they are frequently repeated with every up and down cycle of copper.
Probably the best way of trading copper for most investors is to buy some leading copper producers, including Freeport-McMoran, BHP Billiton and similar copper producers. The challenge with buying these companies is that an investor also exposes themselves to mining and company risk. Buying copper directly on the commodity exchange requires being a more sophisticated investor, but also limits risk strictly the value of the commodity.
Even if an investor chooses not to trade copper, it is still a wise move to follow the price trends of copper for making decisions in other investment sectors.