Being one of the most liquid investment commodities in the market, crude oil is a tradeable commodity with clear charts. Just like any other investment commodity, traders need to know and understand the factors that have an influence on the price of crude oil i.e. market supply and demand. In addition to the supply and demand factors, it is crucial for oil traders to conduct a fundamental as well as technical analysis to stay updated with the current oil market trends and make a better investment decision. What else? Traders should also invest their time and efforts in crafting and following the right crude oil trading strategies. If you are looking for the strategies and tips for oil trading, you have come to the right place! This post is all about crude oil investment tactics and the tips on how an individual can get an edge over the market. Let’s get started.
Crude oil is the primary source of energy. It can be used to create an array of products including but not limited to petrol, lubricants, wax, diesel, and so on. The liquidity and high crude oil demand are the main reasons why this commodity is traded in a high volume. Brent contributes to the world’s two-thirds of the total oil traded every year following WTI.
It is not rocket science to know that supply and demand are the two major factors that have a great impact on oil trading. No matter what investment commodity is traded, its price can be determined by looking into its supply and demand in the current marketplace. Now the question is “How supply and demands are calculated”? Well, these factors keep on changing with time, weather, and other conditions. Let’s discuss the factor that affects supply and demand for crude oil:
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The professional oil crude traders follow a fundamental oil trading strategy after taking into account the supply and demand for the commodity in global markets. It is worth to note that the trading strategy of investors may vary to a great extent. But risk management is one of the most crucial factors that every trader should consider before finalizing a decision. The accurate crude oil strategy is based on three factors i.e.
As soon as you comprehend the fundamental factors of supply and demand for crude oil, the next step is to study the technical analysis. Technical analysis helps you get the signals for entering into the crude oil trading market. Once the buy and sell indications are identified, it is time for traders to follow risk management strategies. Let’s demonstrate this with an example:
In 2017, Russia and OPEC announced crude oil production cut, which led to a decrease in the supply of oil across the global oil markets. This is what we call the fundamental strategy that the traders must add to their oil strategy to determine the buy and sell signal. The next step is to look into the chart with the help of technical analysis. Fortunately, there are a plethora of technical indicators as well as price patterns that can be used to ascertain the right signals for entering the trading market. One of the famous indicators is the Relative Strength Index (RSI). Coming to the last step, the traders must manage the risk by avoiding trading mistakes. It can be done by setting take profits and stop losses.
These were some important strategies the traders must take into consideration before entering the oil trading market. So why wait? Use fundamental and technical indicators and ensure a successful crude oil investment decision.