‘Investing’ Category

Oil Futures Trading

Oil futures trading refer to the process of trading oil contracts in a futures market with the aim of earning profits along the way. In this sense, th...


Oil futures trading refer to the process of trading oil contracts in a futures market with the aim of earning profits along the way. In this sense, those who are involved in futures oil trading is not really concerned with the actual oil that is the basis of the trade, but they utilize the movements of capital and fluctuations in the market to gain something out of it. Oil futures trading is a good market to trade nowadays because the reality is that the world is still primarily oil-dependent and it will not likely to change for sometime. This means that oil is still going to stay a liquid asset that you can trade at any time of the day.

The futures trading system was utilized a long time ago when sellers of commodities like farmers pledge a certain amount of goods to a dealer that will be delivered at a fixed future date. However, when the seller encounters a certain kind of problem in producing the required amount of goods before the delivery date, for instance a drought, that person would sell the futures contract to another farmer who has the ability to fulfill the terms of the contract to the dealer.

As contracts changed hands, people noticed that the different variables in the market affected the prices of these futures contracts. Soon, people who are not really invested in acquiring the goods involved in the futures contract got involved in the trading of them in order to gain some profits off them before the actual exchange of goods materialize. These people are called speculators as they predict the movements in the markets and try to make use of this knowledge to make decisions on what to do about their assets that are on paper”.

Oil futures trading applies this concept of futures trading system on oil barrels. Basically the commodity basis of oil futures trading is crude oil. It is because crude oil is an unprocessed commodity that can be further converted into various forms by numerous industries. This is also what makes oil futures contracts a very liquid asset since a lot of companies will be surely involved in the actual exchange of these goods.

Oil Forex Trading


Oil forex trading is a means by which people from all over the world can trade oil futures contracts at the comfort of their own homes. It utilizes the worldwide international over-the-counter foreign exchange market to facilitate the trading using currencies from different countries. It is based on various financial centers from around the world that allows different of buyers and sellers to trade oil futures contracts at any point of the day, except during weekends.

In oil forex trading, the foreign exchange market settles the relative value of each currency. Oil forex trading ensures international trade and investment by making it possible for people from one country that uses a particular currency make a transaction with people from another country with a different currency. The result of this is a very liquid flow of financial capital globally due to the involvement of multiple countries in these trades.

Oil forex trading is especially important in the foreign exchange markets because oil is a very important commodity in the world today, notwithstanding global concerns about the environmental problems caused by it and the calls to reduce our dependency on it. As of now, there is no clear alternative for oil as a source of energy and therefore it is more likely that it will remain to be a valuable commodity for quite some time. And like most transactions in the foreign exchange markets, oil forex trading is affected by a variety of factors especially those that directly involves oil production.

One of the factors that constantly affect oil forex trading is the political conditions of countries that are directly involved in the production of oil. Instances such as a regime change or destabilization of governments in these countries can cause significant changes to the production of oil and cause repercussions in the oil forex trading markets. A particular group of countries to watch out for is the Organization of the Petroleum Exporting Countries or OPEC. This very influential group is composed of 12 oil exporting countries that has the ability to control the prices of oil. Therefore it is worth knowing the political conditions in these oil producing countries if you want to engage in oil forex trading to ensure that you make the right decisions in making transactions.

How To Trade Oil


Commodity futures, also known as futures contract is a business transaction to buy or sell a commodity at a specific date in the future at a specific price. In order for a good to be included in a futures market, it must be standardized, unprocessed, and raw, must have an adequate shelf life for delivery, and there must be price fluctuation and uncertainty for the good. These makes the futures market profitable for people, even to those who are not really interested in buying or selling the actual goods.

There are many things that are traded in a futures market and one of them is oil. It is a very important commodity as it greatly affects the global economy. And with the help of modern internet telecommunications, anyone with enough capital can participate in oil trading. You can now trade oil in New York Mercantile Exchange (NYMEX) or through Forex brokers as contract for difference (CFD). Through oil trading, you can make money with oil without actually owning one, while you are behind a computer screen.

In order to trade oil, you will need an oil broker that will supply you with the virtual trade contracts that you will manage. Oil brokers will also provide you the trading software and market analysis. To obtain profits when trading oil, you need to correctly analyze the available data from the oil markets so that you can use them to your advantage. Your oil broker can also advise you about the trends in the market and make probability estimations of the future direction of it.

When trading oil contracts, you have to pay your oil broker commissions for every trade that you make. Oil brokers have varying prices for buying and selling, which is how they make money out of the whole thing.

You have to keep in mind that oil is a very volatile commodity because it is affected by many global factors such as political crisis or natural disasters. As such, there is no clear-cut formula on when to buy or sell trades successfully. Therefore in oil trading, you win some, you lose some. The important thing is how you are able to manage your finances so that the end result will still be favorable to you.

History of Oil Trading


The history of oil trading can be traced back to commodity trading where goods such as gold, oil, coffee, and orange juice are dynamically traded. In a commodity market, the good must be standardized, raw, and unprocessed. They should also have an adequate shelf life for delivery. Finally, there must be price fluctuation and uncertainty for the goods. These three characteristics make the trading of commodities such as oil possible and profitable.

Commodity trading is something that is not a recent economic phenomenon, although the old forms of it are very much different from what it looks today. Civilizations as old as ancient Sumeria have engaged in commodity trading in order to have a system of delivery of goods and make commerce more efficient and well-organized. Sumerian farmers used a medium very similar to money in the form of clay tokens shaped as livestock when they are trading goats and sheep. They would use these when they would pledge a particular number of livestock to a dealer. They served as the earliest form of futures contract              that were guaranteed by local banks back then. Eventually this system grew into a global market for trading gold and silver for other goods.

Meanwhile the beginning of modern commodity trading can be traced to Chicago, where the Chicago Board of Trade was established in 1848. It served as a central place for farmers and dealers to convene and settle prices. With this system, prices and negotiations became more transparent resulting in a standardization of weights and grades based on aggregate supply and demand.

Because of the success of the standardized central market, more farmers and dealers became engaged with futures trading wherein they commit to future exchange of goods in exchange for cash. These trade contracts were securitized by banks and used them as collateral for loans. Eventually these contracts changed hands if the farmer and dealer encountered certain circumstances that would make the deal unfavorable to them. These farmers and dealers noticed the trend that the value of contract changed whenever there is an event in the market, such as bad weather. This became the blueprint of the modern commodity trading that we encounter nowadays. Finally, people who have no intention of selling or acquiring goods began joining the market and became speculators in the now-liquid futures market.

Crude Oil Trading


Crude oil trading can be a lucrative way to earn money. It is however very risky as it can be affected by unforeseen circumstances like natural disasters, political tensions, or oil spills. Therefore in order to be successful in crude oil trading, you do not only need a lot of guts to make risky transactions, you also need intuitive insights that will allow you to see through the vast sea of market information in order to make the right call at the right time.

Crude oil trading takes place through oil brokers who provides the investor with the trading software that is used to make transactions. In addition, they also provide you with an analysis of the market so that you can make an informed choice. This is very useful especially if you are just new to the business since it will allow you to learn your away around through the field. It is because eventually, you will have to make an analysis of the market on your own it is not a good idea to just rely on what other people will say to you.

The most important thing in crude oil trading is forecasting the highs and lows in the market. The idea in order to earn profit from crude oil trading is to assume a long position if the trend in the market is going up, and to assume the short position once you are certain that the price of crude oil barrels are on a steady decline. In order to precisely predict these trends, you have to be aware of what is the latest happenings in the crude oil market. You can do this by being updated with the news.

Another important source of market information in crude oil trading are two macro economic oil data releases: crude oil inventories and natural gas storage. They are released once a week on a fixed schedule by the Energy Information Administration. These two releases can have a strong impact on the markets as it may cause fluctuations and false movements. It is therefore recommended that you hold off on crude oil trading for at least 15 minutes before resuming in order to let the market stabilize itself for a while and so that you can get a more accurate reading of it.