Crude oil holds an important place in energy sector as well as in world’s economic and political system. Crude oil trading offers excellent opportunities due to its volatility which allows its investors to make huge profits overnight. Most of the economies across the world rely majorly on crude oil distribution due to its increasing demand in industrial use. Moreover, the prices as well as import of crude oil fluctuate frequently depending on the performance of oil producing nations. The only thing is, you must evaluate and analyze its strong trends in the international market and then invest in into it to make successful monetary gains. We have mentioned some best strategies to be considered while dealing in crude oil trading tips.
Elementary Market Trends
As we all know, No gain without pain, so before investing in crude oil and expecting to make huge money out of your investments, you have to be cognizant about supply and demand factors of crude oil. The demand of crude oil is dependent on global economic output and the high purchasing power of various nations. Overproduction of crude results in declined demand and vice versa. Therefore, a smart investor must be aware of these basic trends to formulate their investment strategies accordingly.
Swing Trading Strategy
This type of trading strategy is best suitable for those who are looking for short term investments in crude oil. Buying a security and holding it for a short time period of three to four days or even a week. Oil trading under this strategy rely on short-term changes in supply and demand and technical analysis to determine the market’s trend. Swing traders buy a futures contract if the market is trending up and sell if the market trends down. Remember, there is a great risk involved in crude oil trading as the prices fluctuate frequently, hence, you have to be eagle-eyed regarding your investments.
Spread Trading Strategy
Under this strategy, the investor buys one crude oil futures contract in a month and sells another futures contract bought prior to this month. The aim is to gain returns between the time period of purchase and selling price of contracts. The profit and loss in this case depends on the crude oil trade widening during that purchase and sell time period. If the trade increases, investor makes a profit and if not, there is a loss. Here you can also checkout the top 10 actors in india business strategy.
Risk-to-Reward Ratio
Before you start with crude oil trading, set your risk-to-reward ratio. The ratio is so planned by dividing the expected amount an investor tends to lose if the prices decline by the amount of profit he is likely to earn. It helps investors to get better trade results and also assists them to uphold good share market risk management which forms a crucial part of profitable trading. Be specific while calculating your ratio depending on the type of investment you have made.
Choosing the right Market to Invest
There are two primary markets to trade in oil trading, one is West Texas Intermediate (WTI) and the other is Crude and Brent Crude. WTI originates in the U.S. basin and from other local sources whereas Brent comes mostly from fields in the North Atlantic region. Both the markets have their own pricing and demand and supply patterns. Hence, think deeply before investing in any one of them.
Considering these five strategies will definitely make you adept in trading oil. The most important aspect in oil trading is its highly fluctuating prices which are affected by various factors, hence, it will be better to keep your ears, eyes and mind open and keep evaluating the market scenario.
