Crude oil futures appear to be one of the most popular commodities that are traded very actively. High trade volumes ensure greater liquidity that is perfect for intraday traders. If you are new to the instrument and do not know what to start with, we have prepared some useful tips that will help you implement a simple crude oil intraday trading strategy and start making a profit.
The idea behind the asset is very simple. We have some major oil producers on the one side. They look for maximum exposure. This is why companies use oil future contracts to hedge that exposure. On the other side, we have intraday traders seeking bigger market swings and a chance to make a profit using speculative techniques.
It all sounds pretty simple. However, the oil market has grown extremely overcrowded over the last few years. The only way to perform at a high level and make a good profit is to work out an effective crude oil intraday strategy.
Before we start discussing oil trading tips and strategy insights, we need to consider several core aspects. Make sure you clearly understand each of them before you enter the market with real funds. A good idea is to use a Demo account and try some of the oil trading tactics without the risk of losing real money. So, the main points to remember are the following:
With these aspects in mind, you may try to make your first steps when trading oil.
Trading oil has one crucial advantage for beginners. It does not require huge investments right from the start. With the minimum deposit, you will still have endless opportunities to bear fruit mainly thanks to higher leverage. The only thing you need to keep in mind that crude oil is not only about liquidity. It also comes with extreme volatility, which makes it hard to foresee the market and price moves. This is where technical analysis, news and analytics may come in handy.
In addition, you will need several crucial technical indicators. While MTrading offers commodity-brokering services, you will also be able to pick up needed skills and knowledge in our Education section with multiple indicator guides with tips on how to install or use them together with the MT4 trading platform.
The oil market is different from currencies, metals, or other asset classes. It requires better reading and faster decision-making, especially in terms of intraday strategies. Traders need to take into account critical factors that include oil supply and demand balance in addition to changing trends, and price action. For this reason, the best way to benefit from the extra edge is to keep in touch with the latest output forecasts, news, consumption overviews, sectors’ outlooks, etc.
Another comes with the fact that oil markets may drastically react to various geopolitical conditions, which makes them even more sensitive. So, you will need to keep this fact in mind when choosing an instrument to trade (either Brent or WTI).
Keep an eye on every small thing or vibration that may take place in the Gulf of Mexico or Iran. The slightest geopolitical change may have an enormous effect on the oil price as well as its supplies. Another tip is to stay tuned to seasonal patterns. The idea is to follow seasonal trends and flows.
Example: as a rule, the price goes up in August with an increasing number of drivers on the road. Otherwise, it has a tendency to go down by October, when the vacation season ends.
Please, note, that oil prices can be affected by climate changes or unexpected weather conditions. In other words, crude oil is more sensitive to different changes even if compared to stocks. Oil demand usually increases in winter when it is cold and drops down in spring or fall.
The final tip is to consider the connection between oil price and the US dollar. Once the dollar has become stronger, crude oil will also strengthen its positions and vice versa. On the other hand, traders should look for historical data and compare all factors to plot accurate patterns and decide on the next move.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
