Trading in Oil Markets provides an excellent opportunity to profit in all market conditions worldwide. This is due to its unique standing in the world’s economic and political system.
The volatility in this sector has risen sharply in recent years ensuring good returns to short term traders and long term strategic traders. Although there are various market participants that fail to take full advantage of market fluctuations, mainly because they haven’t learned the unique characteristics of this market.
So here are 5 Oil Trading Tips that will help you to ensure good returns in the turbulent market:
#1. Understand What Causes Movement in Oil Market
The oil market moves through perceptions of demand and supply. This is affected to a large extent by global output and economic prosperity globally.
Oversupply and thin demand of oil urge the traders to sell the commodity and push oil to lower ground. While an increase in demand with constant production creates a bullish market and creates a positive uptrend.
So it is important to judge the market and read the trends before assuming any position in the oil market.
#2. Invest in Oil Market When Volumes are High
For intraday traders, volume plays an important role. In oil market, traders should take benefit from high trading volumes. High volume will help to easily liquidate or square off the open position. Easy liquidation can become hard if low volumes are being traded in the market.
#3. Trade During Prime Time
This tip is particularly useful for intraday oil traders. They should take position during the beginning of the session when volumes are high and big moves are taken as compared to the later sessions. So it is beneficial to trade during prime time.
#4. Crude Oil Price and US Dollar
US Dollar has a direct effect on crude oil prices. Generally speaking, there is a downfall in crude oil prices when US Dollar appreciates. To the contrary, when the Dollar is weaker, the crude oil prices tend to rise.
This can be used as a strategy to forecast oil prices. We can say that the US Dollar and oil prices are inversely related to each other. It is quite important to forecast the same before taking any trading position.
#5. Understand Who are Dominant Traders in Market
Oil Trading Market is affected by Commercial Players and hedgers. Commercial players use the trading market to hedge their physical exposure from probable big market swings. On the other hand, hedgers speculate in the market to make short term gains.
While trading in such an overcrowded market it is important to have a strategy to perform at a high level and make quality returns.
With ever-increasing demand in the oil market and big trading volumes, there is always an opportunity to generate some good trading opportunities. It is important for the trader to be prepared and have commodity trading strategy since no Oil Market Trading Tips can substitute the skills that you need to have in order to survive in this highly volatile market.