‘Investing’ Category

Oil Trading System

The oil trading system basically refers to the mechanism where in people from around the world can buy and sell oil futures contracts at the comfort o...


The oil trading system basically refers to the mechanism where in people from around the world can buy and sell oil futures contracts at the comfort of their own homes through the internet. Before the age of the internet, only huge corporations and rich people have the ability to engage in such kinds of trades. The internet has indeed caused the further liquefaction of financial capital all over the world by allowing people to trade at virtually any place and at any time. To make this possible, the oil trading system occurs through foreign exchange markets so that transactions with various currencies can easily be facilitated.

What makes the oil trading system attractive to many people is the high volatility that is involved with it. Sure, there are many risks that comes with high volatility as the prices of oil can fluctuate suddenly due to various factors. However, the potential rewards of the oil trading system are also high as well so you can earn huge profits off it. In addition, oil is still a very important commodity today as the majority of the world is still dependent on it for energy. Therefore you are assured that there is always going to be a movement of these underlying assets that are the basis of the trades.

The oil trading system today allows people without much financial to participate in the buying and selling of oil contracts. Oil trading is done through forex brokers which provides the traders with the trading software as well as the analysis of the market. Brokers offer different leverage rates, which refers to the capacity to purchase a valuable amount of commodity with a relatively little amount of financial capital. To put it simply, a high leverage in oil trading increases the potential gain from your investment, but if you lose in the trade, you also lose a lot.

The oil trading system basically uses the concept of directional trading: when oil prices are projected to increase, then the oil trader is expected to buy oil contracts so that he/she can sell it back in the market once the prices start to fall.

Oil Trading Companies


In order to trade oil, you will need an oil trading company that buys and sells oil contracts for you in exchange for a commission. They are commonly known as brokerage firms or brokers for short. They are very important in oil trading as an individual cannot participate in one without them. That is because the actual oil trading involves huge amounts of money that most person does not have. This way, oil trading companies makes oil trading more accessible to an average person.

Oil trading companies also make it easier for people to trade oil. They can be easily accessed through the internet so that people who are interested in trading oil can create an account online, at the comfort of their own homes. Most oil trading companies also offer free demo accounts so that novice oil traders can practice first and know what it is like to be in a trading environment without risking any of their money. Another thing that oil trading companies provide is the trading software that you will use for the transactions. While most oil trading companies have their own trading software, more and more brokerage firms are starting to use the widely popular MetaTrader 4 platform. Also, some use a web-based trading platform.

There are certain things that you need to take into consideration when choosing an oil trading company because they are quite crucial to the potential outcomes of your trades. One of these things is the leverage ratio that the oil trading companies offer. Leverage refers to the capacity to control a large amount and very expensive commodity with a relatively little amount of capital. An oil trading company that offers a high leverage ratio will allow you to make huge gains but when you lose, you also lose a lot. Some companies offer 1:50 leverage ratios and it can even reach up to 1:200.

The other things that you have to consider in an oil trading company is their minimum account size, minimum transaction size, their funding methods, their trading hours, their client support services, their banking support, their language support and the spreads. These are all important they can help you ensure that those oil trading companies are suitable for your situation and will cater to your needs.

Oil Trading Business


Becoming a professional in the oil trading business requires a lot of experience and patience in order to be successful. The oil trading business is a zero-sum game and therefore losing on trades is a common and inevitable experience. It is however can be very profitable due to the high volatility of oil that is affected by a lot of factors. Therefore if you can stomach losing some money in hopes of gaining a lot more, then you are up for a nice reward if you become successful in this field.

They say that the oil trading business, like any instruments in the financial market, can be compared to gambling as you are only pushing your luck in hopes of gaining a profit. This is not exactly the case. While it is true that risking a certain amount of money is necessary in oil trading business, this field requires traders to have a special kind of analytical skills that will allow them to see the direction where the prices are going. In a sense, this puts the oil traders in the driver’s seat since it gives them the capacity when to make the right calls or transactions.

Of course there are certain external factors that causes the prices of oil to become unstable. It is therefore important for the people in the oil trading business to stay informed and connected with the markets as much as possible so that they can take the necessary actions whenever it is required. In addition, not all information out there in the market is reliable so it is the job of the trader to choose which ones are the most reliable and this is where experience comes in.

Finally, as mentioned earlier, it is also inevitable for people in the oil trading business to lose in some of the trades. Even experienced and veteran traders can make a series of wrong decisions within just a day. Most people react to this by trying to win back their losses, only to lose more money in the process. Therefore it is very important to have always have a clear rational mind and not let your emotions get the best of you in oil trading business as it will surely cause your demise.

Oil Trader


So you think you got what it takes to be an oil trader? The requirements for oil trading isn’t that much. All you need is at least $1,000 worth of financial capital, a broker, and a computer with an internet connection. You do however need to possess some important qualities like discipline and resiliency if you want to be successful in this kind of endeavor.

The first thing that you need to do to if you want to become an oil trader is to find a broker so you can commence on trading oil. This is the main thing that you need to do as you need to be involved with a broker in order to participate in the action‚Äù. Some examples of popular brokers in oil trading today are ForexYard Broker, Easy-Forex Broker, and AvaFX Broker. The good thing is that you can access them and that you can create an account through the internet so you don’t have to go to the NYMEX to actually trade.

Each brokers have their own set of rules regarding the minimum deposit that you can make, with some you can deposit as low as $100 while others require at least $1,000. They also have different rules on the minimum number of virtual barrel of contracts that you can purchase, the margin required per barrel, the and the spread.

Another good thing to look for when choosing a broker is the leverage that they offer. It refers to the ability to control a large amount of commodity with a relatively small amount of capital. This can be a double-edged sword as it describes the volatility of the trade since a high leverage can either lead to large gains or large losses. Oil traders usually get a minimal leverage of 1:40 but sometimes it can go up to 1:200.

If you are a novice oil trader and is still hesitant to risk investing your money, most brokers offer a free demo account that you can practice on before actually entering the real deal. Once you are already a fully pledged oil trader, what you need to do is constantly look out for signs in the market in order to make good decisions  like when to buy or sell oil barrels. Another tip when trading oil is to never risk more than 2% of your trading account on a single trade so that you won’t thrash your account of some bad trades which could normally happen in oil trading.

Oil Options Trading


Oil options trading refers to the right, but not the responsibility, to buy or sell a thousand barrels of crude oil at a certain agreed price, called the strike price within the option expiry date (which is different from the contract expiry date). This makes oil options trading as a derivative contract since no actual exchange of goods is actually involved in this trade but it is however based from a real underlying asset.

Oil options trading is a great way to be involved in oil trading especially if you do not have the huge amount of funds required to participate in trading oil futures contracts. With oil options trading you can trade with a smaller trading account while knowing the value of the risk before the trade.

Basically there are two kinds of options: the call option which gives the buyer the right but not the responsibility to buy the underlying asset at the strike price, and the put option which gives the buyer the right but not the responsibility to sell the underlying asset at the strike price. The person who is the option buyer needs to pay a premium to the option seller in order to obtain this right. Once the buyer exercises this right to buy or sell the underlying asset, the seller of the oil options is compelled to do so at the established price. In addition, the buyer of the options contract may choose not to do anything and let it expire within the option expiry date.

Oil options trading uses the concept of directional trading in order to gain profits off these transactions. What the potential buyer of the option does is that he/she watches the movement of the prices in the market to look for an indicator on when to purchase a call or a put. If that person believes that the price of oil is increasing then he/she will buy a call option so that he/she can sell it to the market again once the price drops; on the other hand if that person thinks that the trend of oil prices is going down then he/she will buy a put option.