Crude Oil Trading: I’m sure that you don’t need me to tell you that oil is one of the online option tradingworld’s most critical and valuable natural resources, affecting all of us on a daily basis. The market price of oil affects everything in our lives from the cost of goods we buy , to the refined products we use for heating and travel, such as gasoline and heating oil. In the last eighteen months oil has hit the headlines moving from an average of $30 per barrel, to an eye watering $150 per barrel, falling back in the last few weeks to a level everyone would have been horrified at only a few months ago, of just over $100 per barrel.
Odd how times change so quickly, and how we become accustomed to ever higher prices for basic natural commodities such as oil. I remember reading headlines only 2 years ago in the markets suggesting that oil would reach $100 a barrel and these market commentators were reviled as scaremongers. How right they were – now $100 a barrel is considered to be cheap, and despite the bearish sentiment of the last few months, the longer term still looks bullish in tone, with Goldman Sachs even forecasting $200 per barrel in the future.
Now one thing I must stress here and now is that crude oil trading whether oil futures (or physical barrels of oil) is unlike any other market, and before you even think of trading these markets, you need to have a solid understanding of how the crude oil trading markets work, the major platforms, the trading cycles, and all the factors which are likely to affect the contracts you trade daily. In order to help I am designing a site which will explain all the above aspects of oil trading in detail, along with a dedicated oil traders blog which will provide an oil trading outlook statement every morning, so that you have a view of the market every day before the markets open. Details of the site will be appear on this page in the next few days with links to the new site and the blog.
The new crude oil trading blog is now live at Prices Oil – this will be updated every morning before 9.00 am with the market outlook and a summary of the technical crude oil trading chart for the day ahead, and I have now published a dedicated site to help you learn all about crude oil trading – now live!
Crude Oil Trading: Introduction To Trading Oil
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If trading oil is new to you, I would urge you to start with another of my sites which provides an introduction to the world of futures trading which is very different to any other market. Put simply, the reason is this – you are trading in real commodities which are affected by real events in the real world, unlike other markets where the underlying asset might be an artificial instrument constructed for the benefit of the major exchanges. Oil ( and many other commodities) are real products with physical properties, with their extraction and onward supply governed and affected by natural phenomena such as the weather ( look at the oil markets as the hurricane season approaches) or natural disaster. Everything from war and political uncertainty to the mundane effects of seasonal variations, can and do affect the price of oil, and not least of all by the management of supply to the market by OPEC ( Organization of the Petroleum Exporting Countries).
One of the questions I am most often asked when traders are considering entering this market is ” What does it take to become a successful oil trader?” – the answer I always give is very simple, and it can be summed up in one word- INFORMATION! Information will be key to your success, whether you are a physical oil trader dealing in real barrels, or simply a futures trader dealing in the spot futures market. Everyone in the market is essentially looking for the same thing – that vital piece of information which will give you the trading advantage or possible advance warning of future problems. So your research and contacts in the market will be essential to your success.
Crude Oil Trading: The Retail Market
For many years, ( and in much the same way that the currency options market is also changing very quickly) trading in crude oil was, until recently the preserve of the major corporations and professional traders. Increasingly companies are bringing new products to market designed specifically for the smaller retail trader and investor. One such company is ODL Securities in London which has recently introduced it’s mini rolling spot futures, using their very successful FX trading platform based Metatrader 4 or MT4. These very attractive bespoke retail contracts are OTC( over the counter) look-alikes based on the standard ICE Brent & WTI NYMEX futures contracts, and are quoted with a very competitive 5 point spread with No dealer intervention, and No commission, allowing you to trade a minimum of 100 bbls, 1/10th of the exchange minimum trade size of 1 lot ( 1000 bbls), with just a 1% margin requirement. Crude oil trading hours are currently between 01.15am and 22.15pm London time. Contracts are rolled on a monthly basis, a day before exchange expiry with no charges. If you would like more details or further information please just drop me a line here and I will send these over to you by return.
It is my belief that this trend is set to continue with the markets developing rapidly in the next few years, with crude oil trading brokers specifically developing their products and markets to accommodate the smaller oil trader and speculator. So if crude oil trading appeals, please just drop me a line for more details above, or follow the link to the new site or daily oil blog which will be available shortly.
Now let’s look at a typical trading day, and the types of research and market analysis one might do as a stocks or shares trader to arrive at a watch list of shares.