8 Basics of Trading Crude Oil all Beginners Should Know

Investments are a great part of our life. We often trade in various goods and commodities in the hope of reaping profits. Therefore, finding the right commodities to invest in is the key to success.

The extensive demand for crude oil is already known to us, and we know how crude oil companies go from rags to riches when they employ the proper strategies. This article is a guide for all those beginners who want to explore crude oil trading.

If you are one of the enthusiastic investors looking for credible crude oil investment platforms, visit this site, and we are sure that this site will be the best portal of opportunities! Now, head on to find some tips and strategies.

1.  Knowing the specifics

Although it sounds pretty cliche, knowing the contract details by heart is a must. It is often easy to get carried away in the excitement and workflow, and we often forget to check out the contract details properly.

So here is what you need to know. The price quotations of crude oil are listed per barrel. Now, every barrel of crude oil has about 159 liters. The number of barrels in the contact varies from country to country. Therefore, you must learn every little detail of the contracts sold in your country.

In crude oil trading, there are fixed timings where the trade can occur, and every contract comes with an expiry date label. Hence, ensure that you remember them to avoid going into losses.

2.  Use The Buy And Hold Approach

Crude oil is no exception from the ways of demand and supply. The buy and hold trick is perhaps one of the most ancient and effective tips that work almost all the time when crude oil is involved.

For this, you need to be adept at understanding how demand and supply influence market trends. Take calculated positions based on your keen analysis. If your predictions come true, then you will reap huge profits well before the expiry date!

3.  Master The Technical Analysis Trading Strategy

The process of decision-making is not as simple as it sounds. They are risky and often might result in negative consequences if not made with caution. This is why any crude oil investor keenly observes the technical indicators before making any decision. Technical indicators are like the Polaris star that guides sailors.

So what are these technical indicators? These include candlesticks, the volume of trading, and bar charts. These are effective tools that predict price trends. You can make well-informed decisions once you are accustomed to future crude oil price predictions.

As a beginner investor in crude oil, this can be a lifesaver because it helps you understand the right time to buy and sell based on the candle formation.

4.  Get accustomed to Swing Trading techniques

Swing trading is quite opposite of the first technique we mentioned. This swing trading strategy involves anything that is for a short period of time. This short period can be just a few minutes or as long as four days!

The short-term changes in demand and supply are sufficient for crude oil investors to reap some profits quickly. However, as a beginner, you should not forget that these short-term decisions are not impulsive. These decisions rely on candlesticks and analysis as well.

Crude oil investors buy futures contracts when the trends point towards a rise and sell them when there is a possibility of a fall. This way, they do not have to wait for long periods of time to get profits.

Crude oil investors, however, heavily rely on the volatility of the market. It is vital to ensure that you do not dive into this technique simply to make quick money because if the volatility causes the opposite effect, you can lose all your money in a single go.

5.  Understand Spread Trading Method

Crude oil investors often buy one futures contract in a month and sell another one in the following month. This ensures that you as an investor would benefit from both buying and selling of the contracts due to the price fluctuations.

6.  Remember the demand trends

Oil is a seasonal product and you should never forget that. The demand for crude oil takes a plunge in the rainy seasons. Hence, avoid making significant deals during these months because the chances of incurring losses are pretty high.

At the same time, invest and trade during the summers and winters to maximize the chances of reaping profits!

7.  Set a stop loss

This is the most crucial of all tips that every beginner must know. Often people tend to prolong their investment time in order to recover from losses. It is a common belief that time would help you recuperate from the losses you incurred from a particular contract.

While sometimes it might actually work, remember that the crude oil trading market does not simply run on hope. Set up boundaries, and if your contract value drops below the loss margins you have set, sell those contracts.

You can recover that lost money from contracts that you might buy in the future, but once the value of your current contract falls steeply, it might be difficult for you ever to recover fully.

8.  Less is more

We are always accustomed to looking at the proportionalities. Associating more investment with more amount of returns is a common practice. However, you must remember that in the case of crude oil, this is not true. Here, less is equivalent to more.

Always start small because the prices are extremely volatile. Trading large amounts always leads to heartbreaks and money loss. Therefore start small and start smart!

Final Words

We have finally arrived at the last part. Before you go and trade in crude oil, remember that crude oil prices fluctuate heavily and are pretty volatile. It is essential to remember that crude oil is simply not just affected by demand and supply but also the geopolitical tensions that might arise at any point in time.

With vigilance and spontaneity combined with these solid strategies, you can make the best out of trading crude oil!