How to Trade Oil Successfully

Monday, September 21, 2015, 6:00 AM | Leave Comment

Trading oil can be much different than online fx trading or any market for that matter. Trading oil as you would any other instrument can often be a mistake. Unless you are scalping the markets for a few points you will need to take various aspects into account which includes fundamental analysis, if you want to trade oil successfully.

Let’s take a look at three important factors for you to take note when you are trading Crude Oil:

  • The Dollar and Oil

    Crude Oil is priced in US Dollars, meaning the American currency exchange rate plays an important role in the day-to-day pricing of Crude Oil.

    So, a weaker US Dollar would likely see a rise in Crude Oil prices, whilst a stronger US Dollar would see the price of the product fall.

    Therefore, having a US Dollar Index chart to hand is very handy in order to help determine the fluctuations in the US Dollar.

    This allows you to conduct your own analysis for the US Dollar Index and then apply your findings to the Crude Oil markets.

    You won’t want to rely on the analysis of the US Dollar alone to be successful, as you should also want to pay attention to the economics that shapes the price of the US Dollar.

  • Production Supplies

    To be able to make consistent profits when trading oil, you should also pay attention to the supply and demand side of the market.

    Similar to most markets, supply and demand form the basis in price fluctuations and the oil market is no different.

    However, you still need to pay attention to the domestic and international supply markets.

  • Politics and Prices

    The MiddleEast is playing an important role when it comes to oil exports both in the US and worldwide. They are a major exporter of Crude Oil to other major economies as well, such as China, India, Japan and Russia.

    Therefore, any unrest in the MiddleEast often leads to an instant surge in oil prices. As a result, traders should always be aware of the risks involved when trading oil.

    Keeping an eye on the news when you are trading for the long-term will help manage the risks involved when you are trading oil.

In conclusion, oil trading can be a very lucrative field to invest in, so long as you don’t end up making bad trading decisions.

I would recommend solely focusing on your trading systems or any technical analysis aspects when it comes to oil.

However, understanding how the oil commodity markets work, and the fundamentals that shape the day-to-day prices, will give you a much greater advantage to trade oil more successfully.

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