Oil has become one of the assets that continue to attract traders from all walks of life. In 2020, crude oil was selling at $20 a barrel. Today, the same barrel goes at $100. It is this volatility that has endeared oil to short-term traders.
As such, crude oil holds a special niche among CFD and ETF traders. Note that oil trading can take place over the counter or on exchanges through short-term and long-term contracts. However, the internet has introduced new ways of trading. A trader needs to open an account with a broker and start trading instantly. This article delves into How to Trade Oil on exchanges like PrimeXBT and many more.
Choosing a Trading Platform
Before you start trading oils, you should choose a platform on which you can place your trades. So the first thing you must do is to choose the right broker and open an account with them. PrimeXBT remains one of the platforms where you can open an account and trade in a variety of instruments. Here, it takes a few minutes to set up an account and jump into trades.
Deposit the Funds
Once the account is ready, a trader needs to deposit some amount of money to allow them to start trading. There are a variety of methods to use to fund your account. You can use an e-wallet, credit cards, and bank transfers.
Research about Oil Market
Before you start speculating, you may need to do a bit of market research and identify trends. Among the things you may consider doing include reading market insight news and financial news reports. The reports will help you to assess and determine whether the price of oil will rise in the future or fall.
You may then choose a platform through which to execute the trades. PrimeXBT could be a good option to anyone interested in trading oil via CFDs.
Place Your Trade
Before clicking on the trade, key in the amount of money you plan to risk on trading oil. Open a position by clicking on the open trade button. Once you open a position, ensure to monitor how the trade moves. In the meantime, continue analyzing the market and keep yourself updated on the latest news and data. It can help you identify the direction in which prices will be moving and key turning points to consider before placing subsequent trades.
Ways To Trade Oils
You can trade oils in three ways:
Spot Oil Price
It refers to buying and selling oils immediately. The buyer does not wait or anticipate selling the oils at a future date. Spot prices show the prices of oils now to allow you to sell them immediately.
They are future contracts in which a trader agrees to buy a certain volume of oil at a future date. The price at which the oil will be sold is set at the time of signing the contract. Oil futures are important since they help companies lock in the price and protect themselves against price movements.
Unfortunately, this method of trading is only popular among speculative traders. Also, one does not need to deliver the physical barrels of oil but can settle the agreement via cash settlement. The commonly traded oil futures are West texas intermediate and Brent crude.
It is more or less the same as future contracts. However, the trader is under no obligation to trade at a future date. So they may choose to trade or not. They give a trader the option to buy and sell oil at a pre-determined price. Therefore, the trader has the option of buying the oil at the expiry of the set date. However, they are not under the obligation to exercise the option.
Note that there are typically two types of options: puts and calls. If you anticipate that the oil prices will rise, you buy the call option. If you anticipate that the price will fall, a trader sells a put option. A trader may also buy a put and sell a call option depending on the trend. If the market goes as per the trader's plan, they make a profit. However, if it goes against their prediction they make losses.