There are many different techniques for investing in spot crude oil due to differences in perspective, but what are the available trading strategies for retail traders to use worldwide?
3 strategies for investing in spot crude oil
In essence, there is not much difference between crude oil trading and precious metals trading such as gold and silver, but when investing, you must judge the future price trends according to the prevailing conditions. The difference is seen through trading and in the work of analyzing market charts. Therefore, traders must continue familiarizing themselves with the current trends to make the right trading decisions.
Whether you are a novice trader who is new to spot crude oil investment or an old-timer in the financial markets, you must have the capital to trade or invest. Only with capital can you make profits or losses. Of course, you also need to ensure that the principal amount is not depleted. If you incur losses, it is imperative to set a reasonable stop loss on all your trades. You must always use a stop-loss order on your trades, even if you are confident in the outcome. If you do not set a reasonable stop loss, you could end up losing a significant percentage of your trading account. There are still significant differences between spot crude oil trading and stock trading. Most stocks can only be bought up, not down; hence, investors cannot benefit from downward movements. As long as a stock is falling, investors tend to lose money.
If you invest in spot crude oil, you must not be greedy. No matter how attractive the prospects of a trade are, you must place stop losses reasonably. You can only guess the future price trend, but you can’t predict the future accurately. As an investor, you never know what will happen next. Therefore, if the price changes quickly, you may feel like you are losing and close your trade prematurely instead of remaining calm and letting your stop-loss order get you out of the trade. Do not be greedy when trading the markets since it may lead to significant losses as you focus on making big profits.
No matter the amount of technical analysis you have done, it is impossible to be completely accurate. Compared to the practice process, it is necessary to combine multiple technologies to do a comprehensive analysis to increase your chances of success.
5 factors that affect crude oil trends:
Crude oil has always been the one commodity that powers the world economy and has always been a determining factor in international politics and economic strength. Therefore, the price of crude oil is affected by multiple factors. In addition, new energy products that completely replace crude oil have emerged in the recent past. Therefore, the dynamics of international politics influence the global economy. Nevertheless, the relationship between supply and demand is still one of the main factors determining crude oil prices.
Development of international norms
The Middle East is the leading crude oil production region. In addition, Venezuela or some other countries also provide part of the global crude oil production. Changes in the political situation within the Middle East have always been the basis for crude oil price trend changes. OPEC’s policies also affect the trends in crude oil prices to a large extent.
Natural causes
Weather and other natural factors influence a large part of the crude oil market that is used to supply energy. Not only will extreme weather conditions lead to a surge in energy demand, but they could also hinder oil transportation due to travel restrictions creating a supply shortage. Extreme weather tends to create challenges in the supply of crude oil, which promotes rising crude oil prices.
Power of international economic development
As a consumer product, the relationship between supply and demand is still the main factor determining the crude oil price. When the economy is good, the oil demand increases, leading to rising crude oil prices.
Substitution of refined products
In the 1970s, multiple crises triggered wars in the Middle East, leading to changes in global geopolitics and oil supply dynamics going forward. The crises made many countries led by the United States realize the importance of crude oil as a global energy source. As a result, US oil companies started exploring domestic oil sources leading to the emergence of shale oil production, which reduced the country’s reliance on oil imports.
Strength of the U.S. dollar
In most cases, international crude oil transactions are settled in U.S. dollars. Therefore, the rise or fall of the U.S. dollar directly impacts the fluctuation in crude oil prices.
This article introduces some of the crucial aspects that affect crude oil’s price trends. Although the fundamentals of the global crude oil trading market have changed over the past year, we are still a long way from achieving an overall balance in supply and demand. Moreover, because of the significant uncertainty surrounding the pace of global economic growth, there are still large fluctuations in crude oil prices. As a result, the crude oil market is now characterized by frequent changes, so investors looking to trade crude oil must pay close attention to market news.
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