Trading in commodities is one of the greatest ways to profit from the ups and downs of their market prices. The most common commodities traded in the market include metals and crude oil. Of these, crude oil is the most preferred one because it is extremely liquid and a trader would be able to profit from it in nearly all market conditions (because of its huge importance to almost all the countries and political systems). Below is a list of things which you need to know in order to trade oil:
1. Learn What Moves Crude Oil
The prices of crude oil are hugely swayed by popular perceptions of demand and supply. The output of oil worldwide plays a crucial role in determining its prices, as well as prosperity worldwide. An excess of supply and contraction of demand helps the traders to sell oil on lower grounds, while the reverse situation helps them elevate the grounds.
If two very powerful trends converge together, they would be able to produce uptrends.
2. It is Very Important to Understand the Crowd
Hedgers and traders who are professionals have a presence in the energy markets. Players in the industry adopt positions so that they can offset physical exposure. Hedge funds, on the other hand, speculate on short and long term direction. Investors and retail traders don’t boast much influence in the oil market. When crude oil prices see a sharp rise, it affects retail sharply, thereby attracting small traders to invest money. The alternating waves of fear and greed would make the underlying trend much greater.
3. You Should Choose between Brent and Crude Oil
There are two markets through which crude is known to trade; Western Intermediate and Brent. WTI originates in the U.S. Permian Basin, while Brent originates in the North Atlantic. These types contain varied content of sulphur and also different gravity. Commonly, lower WTI levels are called ‘light sweet crude oil’. In recent years, Brent has been upgraded to being a better indicator although WTI is now more heavily traded in the world futures markets.
There are a lot of things that one would need to bear in mind while deciding to trade crude oil; the aforementioned points are only a few of them. However, as said right at the outset, oil is a commodity which stays more or less stable throughout the world at a given point of time, so it should be worth a try to seek your fortune in crude oil CFD trading.
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