Oil Futures Trading BasicsOil Futures Trading Basics
Oil futures trading is popular among commodity traders and investors looking to gain exposure to energy prices. These high-risk investments can produce impressive returns for experienced traders if played correctly. However, it is advised that traders only risk a small percentage of their overall portfolio on these contracts.Find out :theinvestorscentre.co.uk
Tips for Managing Risk in Oil Futures Trading
When trading crude oil futures, you agree to buy or sell a certain number of barrels of the commodity at a specific price on a given date in the future. The number of barrels varies according to the contract size you choose to trade. The standard NYMEX crude oil futures contract (CL), for example, represents 1,000 barrels. The smaller E-Mini contract represents half that. You can also trade other oil benchmarks such as Brent Crude or US Gulf Coast Crude if you prefer.
As with all commodities, supply and demand are the primary factors driving prices up or down. Increasing tensions in the Middle East, for example, can exacerbate volatility as investors react to the possibility of future shortages. Additionally, major news events can also sporadically spike the market.
To trade oil futures, you need to open a brokerage account that offers these contracts. Once you’ve done that, you can begin analyzing the charts and finding entry points to your positions. Remember, though, that the leverage involved in these investments makes it easy for losses to mount quickly. This is why it’s important to always monitor your positions and be prepared to take a loss when needed.