What are the oil trading steps that boost profits? Here is a guide on the main trading steps you can follow to increase your oil profits.
Oil trading provides opportunities to profit in nearly all market conditions due to its unique standing within its economic and political system. Globally, crude oil futures are most actively traded and provide liquidity as the trade volume increases. However, you first need to know about commodity trading if you want to know easy steps that boost oil profits.
Research about Crude Oil
Start by learning what moves crude oil prices. Markets move through perceptions of simple demand and supply. However, the demand and supply depend on output worldwide and the international economy. When the collection is exceptionally high, traders sell crude oil, and as a result, the rising demand for crude oil increases the prices higher. Favorable market trends cause a fast convergence between positive factors, rising costs, and vice versa. You need to understand what drives oil as a commodity before trading to make a profit.
Learn about Traders
Studying how expert traders and hedgers drive futures markets is the key to understanding crude oil trading moves. Also, know how the crowd in trading commodities, such as industry players in positions to offset exposure and hedgers that speculate on the long term and short term prospects of crude oil. Retail traders typically don't influence the crude oil markets since they are relatively minor players that depend on media speculation. Nevertheless, their buying and selling patterns can intensify the momentum of market movement.
Understand the difference between Brent and WTI Crude Oil
WTI crude oil and Brent crude oil are the common types of oils used to price each other, and they are small and more independently produced types of oil.
West Texas Intermediary (WTI) is the leading oil benchmark for oil prices, and people use it worldwide to gauge supply and demand. It originates in North America, and people trade its futures on the New York Mercantile Exchange division of the Chicago Mercantile Exchange.
Brent, on the other hand, comes from several North Atlantic fields. These varieties have varying sulfur content and API gravity, commonly light sweet crude oil, with lower levels. Brent is the indicator of worldwide pricing, and this has been the case for years, even though people traded WTI in 2017 more heavily in the world futures markets, which were after two years of Brent volume leadership.
However, pricing between these grades stayed within a narrow band for years although this ended in 2010 when the markets diverged significantly due to a rapidly changing supply versus demand environment. The rise of U.S oil production, driven by shale and fracking technology, increased WTI output while Brent drilling quickly decreased.
Each crude oil's features vary depending on its origin or refining location. Consequently, it has a higher or lower value than the benchmark oil, depending on how closeness to the constituency.
Read Long-Run Charts
Understanding the highs and lows of crude oil market history can explain price fluctuations.
Pick Your Trading Platform
Pick a crude oil trading platform that offers better liquidity. Ideally, handpick the venue to ensure substantial trading in executing trades. Sites that attract professional speculators, such as Oil Profit, may provide better insights into the highs and lows of the price and factors that influence the market for crude oil.
The Bottom Line
Taking the first step to start oil trading, especially oil futures, is complicated, and opening an account is not always guaranteed. However, once you follow the above steps, you can quickly boost your oil trading profits.