27 February 2025,07:57
How-toIntermediateWhat-is
27 February 2025, 07:57
Commodities are basic goods traded in large quantities.
They can be divided into four major categories: metals (such as aluminium, copper, gold, lead, nickel, silver, and zinc), energy (natural gas, coal, and petroleum), agricultural products (olive oil, cocoa, coffee, and sugar), and livestock and meat.
Depending on the commodity and the trader, commodities can be traded on a spot or futures basis.
Commodities are thus very important for investors and traders seeking to enter other markets and diversify their portfolios.
Another reason for increased interest in commodity trading is the fact that the prices of commodities tend to move in the opposite direction of the stocks.
Therefore, investors seek commodity returns when the stock market is highly volatile.
Additionally, the price movements of commodities depend on many factors and are prone to fluctuations, making them ideal for speculative trading via CFDs.
The goal of speculative trading using commodities is to generate a profit from market volatility by accurately predicting price changes.
This can only be done when the trader has all the necessary information about the commodity.
One of the most essential commodities in the world today is oil.
Oil, or petroleum, is a naturally occurring substance that powers our industries, motor vehicles, and many other man-made inventions.
Oil trading involves buying and selling oil and its derivative products from oil companies worldwide.
As you may know, oil is not found in every part of the world, so world governments rely on these sources and their owners to keep their countries running.
This is why it is a heavily traded commodity, but unlike other commodities, it is not feasible to physically buy, store, and sell oil. This is where CFD trading comes in.
Using CFD trading, traders can enter the world of oil trading and expand their portfolios without owning the commodity.
Traders conduct oil trades through online platforms of their choice.
Several online trading platforms are available, each offering unique features.
A trader must select the trading platform with utmost care, as the smooth execution of trades depends on it.
There are several factors to consider when choosing a trading platform, including the types of assets offered, platform fees and charges, risk management tools, and more.
CFD trading via any platform works best for an experienced trader with expertise in trading and a deep understanding of oil trading and the factors that affect it.
As a beginner trader, we suggest building your CFD and oil trading knowledge and practising on a demo account before transitioning to the real market.
This will not only help you build confidence in the matter but also enable you to manage your finances more closely.
To help you get started on the journey, in this article, we will take you through everything that you need to know about oil trading, how to choose an oil trading platform and much more.
An oil trading platform is an online platform where traders place orders to buy or sell oil.
Traders begin by making an account and entering their details.
Their accounts are then verified through email or identity verification.
Next, traders choose the asset class that they want to trade, which in this case is oil.
They place their orders, add tinkering features like stop-loss orders and take-profit orders, and then hit the execute button.
Through these platforms, they can place their trades, monitor them, build a trading portfolio, and visualise the price movements in real time.
Thus, a trading platform is essential to the trader’s arsenal.
These platforms are not only specific to trading oil, but can also be used to trade any asset class as long as it is listed on the platform.
Today, hundreds of online trading platforms exist; some are masterpieces, and some are scams.
It is up to the trader to choose the platform they prefer and deposit funds.
There are quite a few ways to judge the authenticity and performance of a trading platform, and this is what we will discuss in the next part of the article.
To execute seamless trading orders, traders require a reliable and efficient trading platform.
Find such a platform, and traders can use the following key features:
Real-time pricing is essential for making quick adjustments to your trades.
Look for a platform that provides real-time price movements and market insights.
This will not only help you monitor your trade in real-time but also enable you to adjust your trades as time progresses.
Most trading platforms offer this feature as one of the most essential features; however, before you invest your time, personal details, and possibly capital into a platform, ensure it provides real-time pricing updates from a credible source.
Charting tools are technical tools used extensively to analyse data from all possible angles and factors.
These tools include candlestick patterns, moving averages, relative Strength Indexes (RSI), Bollinger Bands, and more.
These analysis tools have mathematical and statistical bases, and understanding them often requires experience and prior knowledge.
Leverage options allow traders to acquire larger trading positions with a smaller initial deposit, referred to as margin.
Platforms that offer margins provide traders with the remaining capital and share the profits in the same ratio.
For example, if a trading platform offers trading leverage of 10:1, a trader can open and hold a position of $10,000 with only $ 1,000 of their own capital.
Not all trading platforms offer leverage options, so traders must carefully select a platform if they wish to utilise this feature.
There are several types of trading orders that traders can place.
These orders are particularly useful when implementing risk management strategies and ensuring that trades are executed effectively.
These are simple market orders, limit orders, stop-loss orders, take-profit orders, and trailing stop orders.
Before a trader settles on a trading platform, they must confirm that the platform allows them to make such order types.
These are just a few key features that every trader should look for when selecting an oil trading platform.
Additionally, be aware that you will be sharing your personal information with the platform, so ensure it is secure.
The platform provides various security measures to protect traders and their accounts.
There are quite a few ways that a trade can conduct trading of oil and its derivatives, and here we look at them in detail:
A crude futures contract is a legally binding agreement between a buyer and a seller, which stipulates that the buyer will purchase the specified quantity of crude oil at the agreed-upon date in the future.
A futures contract is an interesting and highly speculative trading strategy. It can trade any commodity, allowing traders to diversify their portfolios.
Spot contracts involve buying and selling crude oil and its derivatives at the current market price.
This type of trade involves the actual physical buying and selling of oil.
This is why the execution and consequent settlement of the order take around two days, depending on the location of the buyer and the seller.
CFDs, or Contracts for Difference, is a type of speculative trading where the trader makes a profit by speculating on the price movements of an asset without actually owning the asset.
This type of trading is famous as it does not involve an asset’s physical ownership and selling.
There are quite a few advantages of trading oil with CFDs, and here we explain them in detail:
CFD trading in oil offers traders flexibility and removes the restriction of physically owning the asset, which is oil in barrels.
Traders do not need to source oil from companies, arrange delivery, find a storage place, find a seller, and then find a delivery method after selling.
Thus, CFDs offer oil trading without hassle.
Not everyone can access physical oil trading due to various constraints, such as location and storage, so CFD trading of oil offers traders accessibility within the oil trading world.
CFD trading allows traders to hold large positions with small capital, which gives them greater confidence in their abilities and offers a shorter learning curve.
The primary advantage of CFD trading is the diversification of portfolios, which enables traders to access a broader range of asset classes that may not be within their reach otherwise.
These are just a few of the advantages of trading oil with CFDs.
However, like most things, there are also a few risks associated with this type of trading that we will examine in the next part of the article.
Each type of trade comes with its own risks, and here we look at the risks involved with oil trading:
The biggest risk in oil trading is volatility.
Many factors influence oil prices, making them highly susceptible to volatility.
Leverage allows traders to hold larger positions with smaller capital, but also exposes them to a higher risk ratio.
The oil market can be highly dynamic within a short period.
If not closely monitored, traders holding short-term positions are at a high risk of incurring losses.
This is why we suggest that any trader interested in trading oil should first get as much experience as possible via self-study, analysing historical data, and practising on demo accounts.
There are several popular tools for oil trading, and here we look at them:
These charts visualise price movements and help traders make variable decisions in seconds.
These charts display real-time price changes, allowing traders to adjust their trades quickly.
These data feeds provide real-time world news and historical data analytics that can be very helpful to traders.
They provide information on the latest news regarding factors that can affect the price of an asset, making them very handy to keep on the screen.
These features help you manage your risk effectively.
They may include stop-loss orders and take profit orders.
These tools can help you minimise risk and potentially exit a trade when the conditions become undesirable.
These are very important as oil trading can be very dynamic in nature.
As explained, the trading platform plays a crucial role in providing traders with information on assets, factors affecting them, and market trends.
There are numerous platforms available in the market today, which can be overwhelming.
However, there are some tricks that you can use to evaluate a platform and make an informed decision for yourself.
The most important thing to consider when evaluating a trading platform is its usability.
Utilize the platform and evaluate its user-friendliness.
How easy is it to navigate the site?
Are its features easy to understand and assess, or are they difficult to access and even more challenging to use?
Answering these questions will help you understand the platform’s usability and inform your decision to choose or reject it.
Most platforms charge fees for using the platform, conducting trades, and taking profits.
Depending on the platform, these fees can range from one dollar to more.
Some sites also offer monthly subscriptions with promises of providing in-depth insights into the market, subscriber-first information, and personal analytical coaches.
There are various ways these trading platforms can charge fees.
When choosing a platform, ensure you are aware of all associated fees.
Most trading platforms offer educational resources to their traders. Look for the platform’s blog and read through it.
Are these educational resources useful to you?
If so, how often are they updated or posted?
This will help you evaluate the presence and activity of the platform in the trading community.
Evaluate the security measures the platform offers.
Does it offer two-factor authentication, and how easy is it to obtain other traders’ information?
If someone does get that information, what are the platform’s policies on it?
These questions will help you evaluate the platform from a security point of view.
A future contract is a legally binding buying order between a buyer and a seller, which states that the buyer will buy the determined number or units of an asset at the determined price on the determined date in the future.
In the case of the crude futures contract, the buyer will buy crude oil.
A futures contract is an interesting and highly speculative trading strategy.
Oil trading platforms facilitate speculative trading via CFD trading.
A contract for the difference (CFD) is a type of trading where a trader can profit from assets by speculating on their price movements without actually owning the underlying asset.
This type of trading is particularly useful when trading commodities such as oil, coffee, or agricultural products, as it eliminates the need to purchase and store them physically.
Thus, speculative oil trading via CFDs is an attractive pursuit for traders.
Traders should be aware of the highly dynamic nature of the oil market and the factors that affect it.
As oil is one of the most heavily traded assets in the world and is found in vast and tradable quantities in a few countries, world politics and consequent tensions have a significant impact on its price and market.
Traders should always stay updated with global news, industrial news from oil conglomerates, and market sentiment. This will help them make good decisions regarding their oil trades.
An oil trading platform is an online platform where traders place orders to buy or sell oil.
Traders begin by making an account and entering their details.
Their accounts are then verified through email or identity verification.
Next, traders choose the asset class that they want to trade, which in this case is oil.
They place their orders, add tinkering features like stop-loss orders and take-profit orders, and then hit the execute button.
Through these platforms, they can place their trades, monitor them, build a trading portfolio, and visualise the price movements in real time.
Traders can trade oil commodities through CFD trading, where they can specialise in precise differences without actually owning the commodity.
This type of trading is highly desirable among traders seeking to diversify their portfolios and gain access to the oil trading market.
There are many different online oil trading platforms that the traders can choose to trade oil, but the decision to choose must be made with caution and due diligence.
Step into the world of trading with confidence today. Open a free PU Prime live CFD trading account now to experience real-time market action, or refine your strategies risk-free with our demo account.
This content is for educational and informational purposes only and should not be considered investment advice, a personal recommendation, or an offer to buy or sell any financial instruments.
This material has been prepared without considering any individual investment objectives, financial situations. Any references to past performance of a financial instrument, index, or investment product are not indicative of future results.
PU Prime makes no representation as to the accuracy or completeness of this content and accepts no liability for any loss or damage arising from reliance on the information provided. Trading involves risk, and you should carefully consider your investment objectives and risk tolerance before making any trading decisions. Never invest more than you can afford to lose.
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