Trading crude oil provides excellent opportunities for profit, given its importance and unique position within the global economy. The energy sector has experienced sharp fluctuations over the years, resulting in the presence of strong trends capable of producing great results for both short-term swing trades and long-term holding and hedging strategies.
However, some traders cannot make the most of the fluctuations in crude oil prices, due to their lack of knowledge of all the characteristics of these markets. Many of these traders do not understand the hidden traps that could consume their profits. So, what is the best way to invest in oil prices?
Trading oil requires more consideration and study compared to other assets, as there are many oil products you can choose from and when trading the oil market. For example, you can trade a particular oil derivative, shares of oil and natural gas companies as well as oil and natural gas futures. Each of these options has a number of advantages and challenges.
Trading oil CFDs is one of the options that many people interested in trading this sector prefer to use, due to their simple characteristics. "Contracts for difference" (CFDs) are basically contracts between a trader and a broker to replace the difference in value between the time the deal is opened and the time it is closed.
Standard ratios of financial effectiveness vary, but simple margins are more widespread. Most CFD brokers provide the possibility to speculate on the price of oil futures contracts, but the value of the contracts is usually less than the standard values of futures contracts, as the contract for the difference on oil can be worth 25 barrels (depending on the company’s conditions), equivalent to a thousand barrels for standard futures contracts.
CFD trades are usually commission-free (the broker profits from the spread), and since this type of trading does not include actual ownership of the assets, you do not incur any storage or borrowing costs. The most important characteristic of the oil market is that it is a global market that is open 24 hours a day, and has multiple fluctuations in prices, which makes it an ideal environment for day traders who can profit from rapid price movements. The market also enjoys high liquidity, which allows easy entry and exit from transactions of any size.
High-risk investment warning: Trading Foreign Exchange (Forex) and Contracts for Differences (CFDs) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Any opinions, news, research, analysis, prices or other information contained in this presentation is provided as general market commentary and does not constitute investment advice.
Editors’ Picks
EUR/USD hovers around 1.0900 amid falling inflation, focus on ECB’s Lagarde’s speech
The EUR/USD pair hovers around the 1.0900 psychological mark after retracing from the multi-month high of 1.1017 during the early Asian trading hours on Friday. Falling inflation and a stagnant economy in the Eurozone fuel hopes that interest rates could soon be cut.
GBP/USD consolidates losses around 1.2600
GBP/USD pulled back sharply on Thursday amid a stronger US Dollar supported by higher Treasury yields. The pair found support above 1.2600 and is consolidating around 1.2620.
Japanese Yen bulls turn cautious ahead of US PCE data; seems poised to appreciate further
The Japanese Yen continues with its relative outperformance amid hawkish BoJ expectations. Bets for a series of rate cuts by the Fed in 2024 undermines the USD and weighs on USD/JPY. Bears turn cautious and look to the US PCE Price Index for a fresh impetus later this Thursday.
Editors’ Picks
AUD/USD holds above 0.6600 ahead of the US PMI, Fed’s Powell speech
The AUD/USD pair holds above the 0.6600 psychological mark during the early Asian session on Friday. However, the rebound of the US Dollar might cap the pair’s upside in the near term. Meanwhile, the US Dollar Index surges to 103.50 while the US Treasury bond yield edge higher.
EUR/USD hovers around 1.0900 amid falling inflation, focus on ECB’s Lagarde’s speech
The EUR/USD pair hovers around the 1.0900 psychological mark after retracing from the multi-month high of 1.1017 during the early Asian trading hours on Friday. Falling inflation and a stagnant economy in the Eurozone fuel hopes that interest rates could soon be cut.
Gold recovers its losses near $2,040, focus on US PMI, Fed’s Powell speech
Gold price recovers its recent losses near $2,040 during the early Asian session on Friday. The anticipation that the Federal Reserve to hold rates steady and perhaps start cutting in 2024 weighs on the US Dollar and lends some support to the USD-denominated gold.
Cosmos Price Prediction: ATOM eyes 10% gains amid chatter about a fork
Cosmos price is trading with a bullish bias despite a rejection from the $10.218 resistance level. The optimism comes on the back of chatter of a possible fork, expected to result in an airdrop, an outcome that would be effectively bullish for Cosmos Hub.
A November to remember
The narrative for November can be characterized as a story of realization, recognition, and capitulation, particularly regarding the direction of interest rates and the outlook ahead. The month commenced with yields on 10-year Treasuries at 4.90%, but they are now poised to conclude nearly 60 basis points lower, providing a favourable boost to stock valuations.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.