How to Make Money Trading Crude Oil in 5 Easy Steps
In 2003, commodity online trading was introduced in India, and since then, the commodity trading market has grown by leaps and bounds. Today, the Multi Commodity Exchange, the world’s largest for silver, ranks third in crude oil trading. In the world, crude oil futures are most actively traded and provide liquidity as the volume of trade is high. You first need to know about commodity trading if you want easy steps to make money in crude oil trading.
- Commodity Trading - Trading Crude Oil in 5 Easy Steps
What is the concept of commodity trading? Commodity trading is when essential commodities are actively traded with the aim of speculation and management of risk. Commodity trading for speculation involves traders predicting whether a commodity’s price will rise or fall. Commodity trading for the management of risk, or hedging involves safeguarding a potential future price increase of the commodity by buying it currently (at a low price). Trading oil offers commodity traders the opportunity to leverage pricing and make profit. You can know how to trade in oil in five easy steps.
1. Crude Oil Homework
The first step is to learn about what moves crude oil. Markets move via perceptions of simple demand and supply. This depends on output worldwide and the international economy. When there is an overkill in supply, traders sell crude oil. Rising demand makes crude oil prices higher. When positive market trends abound, there is a tight convergence between positive factors, making prices rise, and vice versa. You need to know what drives oil as a commodity before trading to make a profit.
2. Learn About Traders
Understanding how expert traders and hedgers drive futures markets is the key to understanding what moves crude oil trading. You need to know about the crowd in trading commodities, like industry players who are in positions to offset exposure and hedgers who speculate on long-term and short-term prospects of crude oil. Retail traders don’t exert much influence on the crude oil commodity market as they are relatively small players who depend on media speculation. However, their buying and selling patterns can intensify the momentum of market movement.
3. Know the Difference Between WTI and Brent
Two primary markets constitute trading oil. These are West Texas Intermediate and Brent. WTI comes from the Permian Basin in the U.S., while Brent Crude is sourced from the North Atlantic Ocean. Look at Brent markets for a better indication of worldwide pricing in crude oil.
4. Read Long-Run Charts
Knowing about the highs and lows of crude oil market history can indicate reasons for price fluctuations/trends.
5. Pick Your Trade Venue
Pick a place for crude oil trading that offers liquidity. Commodity trading venues should be handpicked so that there is a substantial amount of trading in terms of trades executed. Sites that attract professional speculators may offer you better insights into price highs and lows and what influences the market for crude oil.
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