| Strategy Type | Volatility / Mean Reversion / Breakout |
| Market Bias | Adaptive - Mean reversion in ranges, breakout in trends |
| Timeframe | 15-minute to 1-hour charts |
| Holding Period | 30 minutes to 1 day (intraday to short swing) |
| Risk Reward Ratio | 1:1.5 to 1:2.5 |
| Capital Required | US$700-9,500 depending on contract (Micro vs full) and margin type |
| Best Market Conditions | Works in both ranging and trending markets with proper adaptation |
| Key Concept | Use Bollinger Bands to identify volatility, overbought/oversold zones, and potential breakouts |
| Exchange | COMEX (CME Group) - accessed by Canadian residents through CIRO-regulated futures brokers and cleared by CME Clearing. Note: no Canadian exchange lists base-metal futures, so copper is traded on COMEX in US dollars; the Bourse de Montreal lists only interest-rate, equity-index, FX and energy derivatives. |
| Trading Hours | Sunday-Friday, 6:00 PM - 5:00 PM ET (nearly 24 hours, with a 60-minute halt 5:00-6:00 PM ET). All times Eastern Time (Toronto / Montreal). |
| Copper Bb Characteristics | Copper ('Dr. Copper') typically shows moderate volatility (~1-2.5% daily) that can spike on Chinese demand data, mine-supply shocks, USD swings and US tariff headlines - making Bollinger Bands effective for mean reversion in quiet ranges and for breakouts around macro catalysts. HG is physically deliverable (do not hold into delivery); MHG is cash-settled, which is why most retail and strategy traders use MHG. |
| Tax Implications | There is no securities or commodity transaction tax in Canada. Per CRA Interpretation Bulletin IT-346R, commodity-futures gains/losses are generally on income account (100% taxable, fully deductible) for active or frequent traders; an occasional speculator may instead report on capital account (50% inclusion for 2026, after the proposed two-thirds rate was cancelled in March 2025) if applied consistently year to year. COMEX copper P&L accrues in US dollars and must be converted to CAD - USD/CAD movement is a separate taxable foreign-exchange gain or loss. Futures are not qualified investments for a TFSA or RRSP, so trade them only in a non-registered account. Canadian residents are taxed on worldwide income, so US-exchange profits are fully reportable to the CRA. |
Start with standard settings: 20-period SMA with 2 standard deviations. This works well for copper's moderate volatility. As you gain experience, you can adjust to 2.5 SD for high volatility periods or 1.5 SD for identifying inner zones.
No. Check that bands are relatively flat (ranging market), confirm with RSI (should be oversold < 30), and wait for a bullish reversal candle. Never buy at lower band in a strong downtrend where price is 'walking' the band.
The middle band (20 SMA) serves as fair value and is the target for mean reversion trades. It also acts as support in uptrends and resistance in downtrends. In trends, pullbacks to middle band are potential entry points.
A squeeze occurs when bandwidth (distance between upper and lower bands) is at its lowest in 20+ bars. This indicates low volatility and often precedes a significant price move. Trade the breakout when price closes beyond a band with volume.
Mean reversion: Stop beyond the entry band plus an ATR buffer (e.g., buy at lower band $6.30, stop at $6.27). Breakout: Stop back inside the bands (failed breakout). Trend pullback: Stop beyond the middle band.
%B shows price position within bands: 0 = lower band, 0.5 = middle, 1 = upper band. Values > 1 or < 0 indicate price outside bands. Use %B < 0.1 for long signals, %B > 0.9 for short signals. Track %B divergence for reversal warnings.
Double BB (inner ±1 SD, outer ±2 SD) creates clear zones. Buy zone: Between outer and inner lower bands. Sell zone: Between inner and outer upper bands. Signals in these zones are stronger than single band touches.
When Bollinger Bands contract inside Keltner Channels (BB narrower than KC), it signals extreme low volatility. When BB expands outside KC (squeeze release), enter in the direction of the breakout. Use momentum indicator for direction confirmation.
Best signals require both indicators agreeing. Long: %B < 0.1 AND RSI < 30. Short: %B > 0.9 AND RSI > 70. If only one is extreme, the signal is weaker - require more confirmation or skip the trade.
Higher TF (4H/Daily) provides context - if price in upper half, favor longs. Lower TF (15min) provides entry timing. Best trades: Higher TF shows bias + Lower TF shows signal at appropriate band. Avoid conflicting timeframes.
Score components: %B extreme (+2), RSI extreme (+2), reversal candle (+1), volume confirmation (+1). Maximum 6 points. Trade with score 4+ for quality signals. Adjust for regime - squeeze breakout scoring adds momentum and volume surge points.
Calculate volatility ratio: Current ATR / 50-bar average ATR. High ratio (>1.2): Use 2.5 SD. Low ratio (<0.8): Use 1.5 SD. This keeps signals meaningful across volatility regimes. Also consider longer periods (25) in extreme volatility.
Mean reversion: Sell credit spreads (bull put at lower band, bear call at upper). Squeeze: Long straddle/strangle to profit from volatility expansion. Trend: Directional spreads. Options provide defined risk for BB signals.
Use bandwidth percentile: <10th = Squeeze, 10-75th = Normal, 75-90th = Expanded, >90th = Extreme. Also check band slope for Trend regime. Each regime requires different parameters and strategy selection.
System layers: (1) Data calculation (BB, %B, bandwidth), (2) Regime classification, (3) Signal generation with scoring, (4) Position sizing based on bandwidth, (5) Execution with proper stops/targets, (6) Management with regime monitoring, (7) Performance tracking by regime and signal type.
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