Copper Forex Trading Examples

Assume that an investor opens a forex account by depositing $5,000.

In copper trading, 1 lot = 10,000 lbs. Accordingly, 0.4 lot = 4,000 lbs. The minimum transaction size is 0.01 lot, equal to 100 lbs. Quotes are based on the price per pound (for example: $3.47).

Assume that the current spot price of copper is $3.709 per pound, and the investor expects a downward movement in copper prices. In this case, the investor’s position direction will be SHORT.

The investor will take a position as follows:

1 LOT = 10,000 lbs = $37,090 (10,000 × $3.709)

For this transaction, 10% of the position size will be used as margin from the account balance.

Initial Margin = $37,090 / 10 (Leverage Ratio) = $3,709
(An amount of $3,709 will be reserved from the account as margin to open the position.)

In summary, the investor has opened a short position with a position size of 1 LOT = 10,000 lbs = $37,090.

If the copper price falls to $3.609 (a decrease of $0.10 = 100 pips), what will be the profit or loss on the investor’s account?

1 LOT = 10,000 lbs × $3.609 (current price) = $36,090 position size

The difference between position values:
$37,090 - $36,090 = $1,000 profit, which will be reflected in the investor’s account.

Therefore, for copper, a $0.10 movement per 1 lot equals $1,000, and a $0.001 movement equals $10.

If the investor had made the same transaction with 0.10 LOT, the following situation would occur:

0.10 LOT = 1,000 lbs = $3,709 (1,000 × $3.709) position size.

For this transaction, 10% of the position size will again be used as margin from the account balance.

If the copper price falls to $3.609, what will be the profit or loss on the investor’s account?

0.10 LOT = 1,000 lbs × $3.609 = $3,609 position size

The difference between position values:
$3,709 - $3,609 = $100 profit, which will be reflected in the investor’s account.