How to Trade Oil – Crude Oil Trading Strategies & Tips

John Doe February 2nd, 2021

Crude oil is ranked among the top liquid commodities in the world which offers a good platform for investors to make good profits through it. As it is a limited resource, its volatility offers much adventurous margins though which its investors manage enough to gain maximum out of their investments. Moreover, the overall global demand and supply of crude oil depends on various social-economic factors which are to be taken into consideration before and even after making investments into it. It is a primary energy source to the entire world’s economies. Hence, investors need to develop a proper plan or a strategy to deal with it and we will help you gain enough insights through this informative post which will depict the key factors which influence its prices and how to come up with an effective strategy to trade crude oil commodity.

Understanding the demand and supply part

Considering this major focal aspect, you need to develop your trading strategy as it will play a crucial role in deciding when to invest and when to sell off. Generally seasonality is a major aspect in crude oil consumption both at individual level and industrial level. The U.S and European countries are its major consumers but in the recent times, countries like China, Japan and India has also surged as its key consumers, hence, investors need to keep a track of these nations consumption level.

Selecting an apt crude oil market

There are two primary markets through which crude oil can be traded, one is West Texas Intermediate and the other is Brent Crude. WTI originates most from U.S basins including some other local sources whereas the Brent covers the region of North Atlantic. Both the market offer different quality crude oil with different amount of sulfur and API gravity present in the oil. The sulfur content present in crude oil is a deciding factor in its refining process. After 2015, most of the investments across the world are made through WTI market.

Margin in crude oil trading

Margin in crude oil commodity trading is much similar to a security deposit which allows investors to buy the entire contract by just paying a nominal amount in the beginning. As compared to other commodities, crude oil offers the highest margins for its investors.

Crude oil Futures

To get started with crude oil futures trading, you need to select a broker, open a trading account and go live. You need to be well planned before getting started with oil future trading. This is the most frequently traded derivatives across the world by major crude oil investors. It’s just like entering a contract where you have to deposit an amount on the current crude oil price for a certain time period. You can sell your contract even before its expiry depending on the crude oil rates live fluctuations and on your trading skills. Mostly the experienced traders opt for such investment policies but it can be beneficial even for the beginners.

Technical analysis trading strategy

There are lot many technical aspects which need to be grasped for laying a perfect investing strategy. Candlesticks, Bar charts and volume of trading are some of its technical indicators which help you to predict future price movement of oil.

Buy and Hold trading strategy

This is the most widely used trading strategy where traders analyze demand and supply factors and take calculated risks, the moment they realize that their prediction on crude oil rates live has come true, they sell their positions and book profits.

Considering these above mentioned facts, one can easily get started with crude oil trading and if you implement these basic fundamentals in your trading strategy, it will definitely pay you rich dividends in making good profits through this highly volatile commodity.