The price of crude oil is not only determined by the fundamental outlook for the physical commodity and global supply and demand; it's also determined by the actions of traders. The price of crude is constantly fluctuating, and day traders use that movement to make money. Day trading crude oil is about speculating on short-term price movements, rather than attempting to assess the "real" value of crude. By using a combination of long and short positions, day traders can turn a profit whether the price of crude is rising or falling.
Traders do all this without ever physically handling crude oil. Instead, all of the trading transactions take place electronically, and only profits or losses are reflected in the trading account.
The two most common securities used to achieve this goal are futures contracts and exchange-traded funds ETFs. Here's how day traders do it. Day traders, by definition, close out all contracts each day.
They make a profit or loss on each trade based on the difference between the price at which they bought or sold the contract and the price at which they later sold or bought it to close out the trade.
In the U. These increments are called "ticks. When you buy or sell a futures contract, you measure your profit or loss by counting ticks. A tick is the absolute smallest movement that a contract can experience. In real-world scenarios, a contract can move by hundreds of ticks in a day.
In just a matter of hours, a trader can experience massive profits or losses. Keep in mind that you will also need enough money in the account to accommodate for potential losses. When you trade on margin, your entire account is collateral. If you fail to swiftly deposit the cash to meet those margin requirements, your brokerage could sell your assets at its discretion. Beginners may find this strategy more accessible since they can trade price movements in crude oil through the stock trading account they likely already have.
The values of crude oil ETFs reflect daily percentage price changes. ETFs trade like stocks, which means you won't have to calculate tick sizes. However, while you can day trade single shares, ETFs like stocks are typically traded in share blocks called lots.
How to Trade Oil: Crude Oil Trading Strategies & Tips
Options contracts typically cover at least shares of the underlying security, so options traders can't trade single shares. Beyond that requirement, the amount of capital you need to day trade a crude oil ETF depends on the price of the ETF, your position size, and whether you're trading with leverage using borrowed money.
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It is highly demanded, traded in volume, and extremely liquid. Oil trading therefore involves tight spreadsclear chart patterns, and high volatility.
When trading oil, the two major focal points is supply and demand. Whether there was an economic report like a news event or press release or tensions in the Middle East, the two factors that will be taken into consideration is how supply and demand is affected, because this will affect the price. Supply Factors. Demand Factors. Read more on understanding the core fundamentals for trading oil. Expert oil traders generally follow a strategy.
They will understand the fundamental factors that affect the price of oil and use a trading strategy that suits their trading style. Each trading strategy is different, risk management is an important component to consistent trading, like the effective use of leverage and avoiding top trading mistakes.
A comprehensive crude oil trading strategy could include:. Then, when a buy or sell signal has been identified using technical analysis, the trader can implement the proper risk management techniques. On the 30 th of NovemberOPEC and Russia agreed to extend an oil production cut, which lead to a decrease in supply.
This is the fundamental analysis a trader would need to incorporate into their strategy in order to identify buy signals in the market.
The next step would be to analyse the chart using technical analysis. There are a variety of technical indicators and price patterns a trader can use to look for signals to enter the market. There is no need to use many technical indicators, one that you understand well will do the job. In the chart above the Relative Strength index RSI is the main technical indicator used to look for a buy signal.
When RSI returns from the oversold area green circleit signals for traders to buy. Given that this technical analysis is in-line with our fundamental analysis a trader could execute the trade and set reasonable stop-losses and take-profits.
To manage risk, the trader could look to set a take-profit above the recent high and set a stop-loss at the recent low. This sample trade would illustrate a positive risk to reward ratio.
We researched millions of live trades in a variety of markets and discovered a positive risk to reward ratio was a key element to consistent trading.Here I am giving my personal view only.
These are purely a view point and there is no guarantee on the returns with CrudeBull. Copyright Disclaimer Under Section of the Copyright Actallowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research.
Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use. Disclaimer : All my videos are for educational purpose only, please take trade with help of your Financial adviser. Hello sir Kya Aap mujhe only crude oil me level provide karayenge. Aapke service mujhe leni hai fess kitna hai.
Thank you for your video. I wan one clearification that how we can determine that we have to go for Buy of Sell. Please clerify. Bhai 6 min to negative comments me gawa diye. Sir,plz do videos daily on crudeoil. Dinesh bhai woh 12th August k din market half day tha. So no trade, that big candle is of 13th August.
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Search for:. Trending Videos. These are purely a view point and there is no guarantee on the returns with CrudeBull Copyright Disclaimer Under Section of the Copyright Actallowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research.
Share it with your friends! Related Videos:. Comments Harish Madireddi says:. Niranjan Pratapsingh says:.
Crude Oil Trading: A strategy that works.
Jio aur Jine do says:. Pedro Dujon Malode says:. Rajesh Sogarwal says:. Jithin says:. Sunil Shaw says:. Udhayanan M says:. Shining Star says:.Thanks a lot for this strategy. I did backtest for last one month on crude, nifty and banknifty. It will be very useful for a person who trades atleast with 3 lots so that he can maximize the profits if it hits second and third tgts. That doesn't mean it is not good for one lot trader.
Even if he books every time at first tgt, sure he will end the month with profit. Thank a lot for sharing such good strategy. Also thank a lot for sharing technical analysis metterial on telegram channels. Sirji, Level dena kyon band kar diya Aapke banknifty level tho super duper hit hote hain. If possible please give banknifty levels again. Aapki hi tarah sabhi achchhe manas ho jaye to kitna achha ho.
Shayad kuchh achhe karm rahe honge pichhle janam ke Jo aap jaise nek dil bande se seekhne ko mila. Bahut bahut dhanywad Ji. Search for:. Trending Videos. Share it with your friends! Related Videos:. Comments Mahesh M says:. P Sathiyamoorthi says:. Liferekha information says:. Arjun Muktawat says:. Vasudev M. R says:.Also, energy sector volatility has risen sharply in recent years, ensuring strong trends that can produce consistent returns for short-term swing trades and long-term timing strategies.
In addition, not all energy-focused financial instruments are created equally, with a subset of these securities more likely to produce positive results. Learn What Moves Crude Oil Crude oil moves through perceptions of supply and demand, affected by worldwide output, as well as global economic prosperity.
Oversupply and shrinking demand encourage traders to sell crude oil markets to lower ground while rising demand and declining or flat production encourages traders to bid crude oil to higher ground. Price action tends to build narrow trading ranges when crude oil reacts to mixed conditions, with sideways action often persisting for years at a time.
Understand the Crowd Professional traders and hedgers dominate the energy futures markets, with industry players taking positions to offset physical exposure while hedge funds speculate on long- and short-term direction.
Retail traders and investors exert less influence here than in more emotional markets, like precious metals or high beta growth stocks. The subsequent waves of greed and fear can intensify underlying trend momentum, contributing to historic climaxes and collapses that print exceptionally high volume. WTI originates in the U. Permian Basin and other local sources while Brent comes from more than a dozen fields in the North Atlantic.
These varieties contain different sulfur content and API gravity, with lower levels commonly called light sweet crude oil. Brent has become a better indicator of worldwide pricing in recent years, although WTI in was more heavily traded in the world futures markets after two years of Brent volume leadership. Pricing between these grades stayed within a narrow band for years, but that came to an end in when the two markets diverged sharply due to a rapidly changing supply versus demand environment.
The rise of U. This ban was removed in The majority of futures traders can focus exclusively on this contract and its many derivatives. Exchange-traded funds ETFs and exchange-traded notes ETNs offer equity access to crude oil, but their mathematical construction generates significant limitations due to contango and backwardation. It peaked late in the decade and began a torturous decline, dropping into the teens ahead of the new millennium.
As of Feb. However, it has a relatively high risk due to the 1, barrel contract unit and. The U. Oil Fund offers the most popular way to play crude oil through equities, posting average daily volume in excess of million shares. This security tracks WTI futures but is vulnerable to contango, due to discrepancies between front month and longer-dated contracts that reduce the size of price extensions. Oil companies and sector funds offer diverse industry exposure, with production, exploration, and oil service operations presenting different trends and opportunities.
While the majority of companies track general crude oil trends, they can diverge sharply for long periods. These counter-swings often occur when equity markets are trending sharply, with rallies or selloffs triggering cross-market correlation that promotes lockstep behavior between diverse sectors.
Some of the largest U.
Bearish crude oil positions require buying these crosses while bullish positions require selling them short.Barchart Opinions and Trading Strategies are not a recommendation to buy or sell a security. Your decision whether or not to make a purchase should be based on your own due diligence and not on any representation we make to you. Your browser of choice has not been tested for use with Barchart.
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The following trading strategy is going to keep you on the dominant side of the crude oil market, and provide you with a little-known and seldom-used alternatives volatility model that serves as a reliable trading filter. This time, I would like to share about developing a consistently reliable approach to trading crude oil futures.
Before we jump into the actual strategy, it is important to note that many TradingSchools. The basic idea are:. Crude Oil futures contracts are highly liquid. Typically, a million contracts will trade on any given day.
If you trade within this time frame, you will be participating with the majority of the daily trading volume. It is also important to liquidate your crude oil futures contracts before the day session ends.
For the purposes of this blog post, we are going to be only focusing on trading crude oil futures contracts intraday.
We do not want any overnight exposure or additional margin requirement. We are looking to get the most trading bang for our trading buck. Or the sucker putting his casino chips red or black.
When you are gambling, you are making a wager where the house has a statistical advantage. Enough wagers and the house will grind you to nothing. You want to own the slot machine, or the Roulette table, or the sports book. But in order to achieve this, you need a statistical edge. Let others play against your edge, and watch them lose. In a prior blog post, we talked about a simple and robust trading strategy that we applied to the Emini SP futures contract. The concept is exceptionally simple.
We called this strategy, the Mid-Point trading strategy. Using only the day session of the crude oil futures contract, we are going to be only focusing on the Buy side, or the Long side. The first thing that should jump off the screen is the sample size. What is so promising is that the sample size gives us plenty of latitude to add an additional filter. We need just enough tortilla to keep this thing together, keep it stable, make it tasty enough to eat.
How can we improve individual trading performance? And how can we do this without over optimization? How can we preserve the underlying logic, without overfitting and introducing the chance of a random outcome?