How to Trade Oil For Beginners

Marketplace trading possibilities are now out there, for compact investors that were once only regarded the domain of substantial institutional or sophisticated commodity speculators. The most rewarding trading that I have experienced, for my clients, more than the last two years is from the Crude Oil marketplace due to the substantial rise and subsequent fall resulting in some spectacular profits more than this short investment period.

The Crude Oil market place can be traded by making use of futures or CFD contracts. The standard futures contract, for Crude Oil is 1000 barrels (42,000 gallons) in size and is valued at $ten USD per 1 tick move, with the tick size being 1 cent. For example, if the Crude Oil was to move from $65.00 to $66.00 on a long position then that would result in a $1000 USD profit to the trader. If you wish to trade a smaller version of the regular Crude Oil contract, then there are MINI CFD contracts out there that cover 500 barrels of oil instead of the standard 1000 barrels. The MINI CFD is half the contract specifications of the major contract and will expose you to only half the margin rate and threat. CFD stands for Contract for Distinction, which implies that there is a profit or loss based on the difference between buying and selling prices, and it is an agreement to pay or receive a price tag distinction.

Crude Oil futures can give the trader the potential to quickly order or sell with no delay in a highly liquid and regulated industry. A futures contract is utilized to acquire or sell a fixed quantity and high quality of an underlying commodity, at a fixed date and price in the future. Futures contracts can be broken by basically offsetting the transaction. For example, if you acquire 1 futures contract to open then you just sell a single futures contract to close that market position.

The existing margin to hold the most important contract is about $10,000 AUD at present. The leverage of the most important contract is at the moment, for example, the equivalent of trading a $65,000 USD ($80,000 AUD approx.) position per contract in the Crude Oil market. The margin is generally a deposit, and is the amount of income that is needed to open a order or sell position.

The trader gains leverage by taking positions making use of margin, and there is no price in interest payments for the reason that futures are standardized exchange traded contracts, unlike direct equity ownership of physical shares. The key trading hours are from 9:00 AM until 2:30 PM, and the electronic session is from 6:00 PM till 5:15 PM through the CME Globex trading platform, Sunday by way of Friday. There is a break from five:15 PM till 6:00 PM of 45 minutes among trading days. The trading hours are based on New York time, and the market place can be access making use of any licensed Australian on-line or full service futures and CFD broker. Most trend following trades are placed throughout the day with an Australian broker and then executed when the marketplace opens in New York at Industry-on-Open or at a prearranged limit cost.

The benefit of trading Crude Oil is that our clients benefit from the down-side by selling the industry short. Brief-selling is the ability to legally sell the futures contract creating an open position in the expectation to buy-back at a later time to profit from a fall in the market place cost. We issued suggestions to short-sell the marketplace, taking advantage of the down-side movement, on a few occasions from August 2008 to January 2009, and prior to that we advised to our customers lengthy-order positions to trade the up-side of the marketplace from October 2007 to July 2008. I based all my recommendations on our proprietary mechanical trend following method that is designed to detect and document all these trading possibilities.

I have found from years of testing and trading that a 20-day break-out signal functions specifically nicely as an entry indicator, for trading Crude Oil futures. If establishing trading tactics, then significant consideration must be placed on the entry, but even significantly more so there need to be predefined methods in place for position exits, and a appropriate strategy of calculating the leverage per trade based on present marketplace volatility. If leverage is not correctly calculated, then the trader runs the danger of taking a hit on trading capital.

The calculation of the right leverage per position is the most over-looked component of trading, and is generally the major reason why most self traders shed big immediately after a lucrative streak. Surprisingly, this calculation is particularly uncomplicated and determines the correct leverage by lot-sizing (number of contracts) based on the current trading account balance and market volatility. Genuine trading is a science, not an art, and you have to lose to win. The old saying "you have to lose to win" is from the hard reality that actual trading is based on statistical analysis, and that you should suffer tiny losses to benefit from larger earnings, that is, if you wish to regularly make dollars with a profitable trading tactic simply because there is no such factor as a technique that tends to make cash on ever single trade. The rules based trading method, that we created, automates the total procedure of trading the Crude Oil market place taking just about every contingency into consideration.

Each and every day, trend followers take calculated risks and trade the Crude Oil futures industry, and those men and women that do the function can substantially profit from this highly liquid market. If you have been struggling with the current share industry circumstances, then now is the time to start learning and becoming involved in the commodity markets. The Crude Oil market will often generate trends at several stages, and with the abundance of trading activity accessible there is no reason to exclusively trade shares when there are potential leveraged gains from trading the direct movements in cost via commodity futures or CFD contracts.