Information about the cost of oil is regularly heard from the media, and even for a person who is far from investing, it is difficult to ignore it. What about the traders – many of them specifically look at this asset as one of the main ones on the market.
The matter is that oil is highly volatile: it falls or rises sharply, and one can make a profit with the right approach. Let us tell you how to trade crude oil futures to profit from changes in crude oil futures prices.
How is oil crude futures trading organized?
The greatest interest for investors is oil futures trading — options are considered less effective tools. A futures contract is an agreement under which both the seller and the buyer deposit a surety, which makes it possible to strike a deal at a specified time in the future and on specified terms. Each futures contract has a specification – a document specifying all the parameters of the instrument.
The main peculiarity of crude oil futures Brent trading is that these are settlement instruments. No physical delivery of oil is carried out using them. The profit is received due to the transfer of the difference between the opening and closing price.
If during the day trading crude oil futures the price of the asset rose, then the amount of its rise will be transferred from the seller’s account to the buyer’s account, and vice versa. Because these contracts are fixed-term, they have a start date, a last circulation date, and an execution date.
The term of oil contracts is one year, and they are executed monthly. The futures of the closest execution are considered the most liquid.
Where to trade oil futures?
To work with oil contracts one needs a trading terminal, a special software, which allows making transactions in the real time mode.
To trade crude oil futures effectively, before using e-mini crude oil futures quotes, it is first necessary to set up the terminal. To do so, add the contracts of interest to the “Current Trading” table and then display the “% Change”, “Last Transaction Price” and “Money Turnover” columns.
Arrange in a convenient way the Quotations stack, as well as the chart of the futures you are interested in. It is advisable to connect the “Current trading” table, the price chart and the market depth of quotations with each other, so that when you click on the interesting futures in the table, the chart and the market depth will change automatically.
Below you can place tables “Limitations on client accounts” and “Positions on client accounts”, reflecting the existing positions in futures and income from trading, and to the right of them – attach tables of deals, orders and stop-orders.
Now you know how to properly trade crude oil futures. Want to practice? You can do so without the risk of losing real money by opening a demo account with one of the many companies. That way you will learn how to analyze the crude oil futures historical chart and make the right decisions. Also you can see Natural Gas futures and Corn futures.
How do I make money trading oil?
There are different ways to trade oil: brokers offer private traders an opportunity to earn on oil futures live, CFDand options are also available. Any of the presented options implies the analysis of crude oil price live price and only after that opening a buy position, if a trader expects the growth of oil prices, or a sell position, if there are risks of quotations collapse.
Usually, traders use currency pairs, and sometimes forget about such assets as oil and gold. However, these instruments are especially interesting due to their technicality because, as a rule, oil price charts monthly react better to various levels and graphical patterns than currencies.
WTI oil is produced in the U.S. West Texas, and the market is in the Western Hemisphere. There is an opinion that WTI oil price history and Brent did not differ much from each other until 2011. Since then, the WTI oil price has become much higher due to expensive transportation; the difference in the moment could be as much as $10 or more.
What factors affect the WTI oil price?
Another important thing when trying to make money out of oil price fluctuations is to understand the factors which affect the market for “black gold”. There are several of them:
Supply and Demand
There is an opinion that it is demand data which can form market trends, but there is not much quality data about the consumption and shortage of oil. There are statistics from OPEC and from Baker and Hughes. However, it is clear that if the world needs oil and production goes up, prices will move up.
In the current situation, due to the general state of the world economy, which is provoking a decline in production and consumption around the world, prices are going down. As soon as the market returns to its normal condition, prices will be able to begin a qualitative growth due to increased demand for the commodity.
Crude oil price chart live and reaction to OPEC production quotas
Due to the reduction of oil production within the framework of the agreements, which take place at the OPEC meetings, the prices of crude oil are increasing. It is the organization’s goal to keep oil prices stable. The moment when Saudi Arabia and Russia didn’t reach an agreement at another OPEC meeting, oil prices collapsed. This is how the market reacted to the price war between the countries and the reluctance to cut production. However, the countries finally came to an agreement and there is every chance for the start of a bullish trend for oil. You might be better off using Google stocks for investments. Because often OPEC is unpredictable.
EIA U.S. Crude Oil Stocks Change
Every Wednesday the EIA United States Crude Oil Stocks Change publishes data on crude oil stock changes, which has a strong impact not just on oil prices, but also on the U.S. dollar exchange rate. In the case of the strong inventory increases we may have seen in April 2020, prices reacted by falling and remained under pressure until inventories began to decline.
Rising inventories mean lower demand, which pressures the price of raw materials and quotations to go down. Falling inventories, on the other hand, indicate potential purchases of oil to fill storage facilities to wanted levels, which in turn pushes prices up.
Weather conditions also affect the oil market. Typically, the end of summer for producers in the U.S. can bring negative information in the form of impending hurricanes. The beginning of fall is when these natural disasters peak, affecting production companies. This causes companies to reduce production by partially shutting down fields, which reduces the supply of oil on world markets and pushes prices up.
Oil Futures Trading. WTI oil price forecast
It is believed that this kind of trading is suitable only for large investors with access to the stock market. A futures contract is a contract to buy or sell oil which will be executed in the future.
If we buy such a contract, we become the owner of the volume of oil we bought under the contract for some time. However, usually such contracts do not result in real delivery; the goal is to make speculative profits.
Futures contracts are traded at specialized exchanges. The minimum contract size is 1 lot, which equals 10 barrels of oil: if the price of Brent is $30, then the amount for opening a deal will be equal to $300.
Binary Oil Options
It is considered one of the easiest trading options. Profit or loss is fixed here. The investor only needs to guess the direction of the rate and buy an option above or below the specified price. If the investor is right, they receive the profit regardless of how far the price has moved from the point of buying the option.
WTI crude oil price chart live. CFD on oil
The third option is trading CFD or the so-called Contracts for Difference. In contrast to futures trading it is not necessary to buy several barrels of oil; you can use smaller volumes of it.
This kind of trading is perfect for intraday trading due to high volatility of oil: one can make profit on the whole movement from the point of opening a position to the point of its exit, in contrast to options, where only a fixed amount is given as profit.
And many followers of technical analysis recommend letting the profit grow and fixing the loss as quickly as possible. Therefore, it turns out that trading CFD on oil has many positive aspects, and due to the leverage can be a significant profit from small amounts, of course, paying attention to compliance with capital management rules.
The risks of oil trading
Oil is a very volatile trading instrument and we will often observe some protracted trends. Rarely does the price of oil stand in a sideways corridor, and in moments of global crises there are strong price collapses due to the fall in demand for the “black gold”. The risks will always be associated with high volatility; one should think over his trading and take a very strict approach to the issue of loss limitation.
It is very important to remember that profits will take care of themselves, meaning that no matter how high they are, we will only benefit from them. If we miss a loss on oil and it goes up, it will be a huge negative for the trader, and in the example of the current market situation the collapse can cause serious losses, if we are standing on the wrong side of the market.
Trading crude oil price charts live in the UK and US is no different from trading currencies or stocks. There are strong external factors which can put serious pressure on the price of oil. Just like in the currency market, news can push the market, you just need to follow world events.
WTI crude oil price chart live is subject to high volatility, so a simple oil trading system can give good profits in moments of strong movements, which will happen quite often. However, you should not forget about money management and control the risks of such trading as much as possible.