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Crude oil trading for beginners

Uploaded Date 23-Jul-19
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Crude oil trading for beginners



You might have heard of importance crude oil tips if you have any traders in your close network. In this article, we endeavor to explain what is crude oil, how you can trade in this particular commodity and how can you make most of the crude oil tips.


What is crude oil?


Crude oil is a basic commodity that is used as an input in various sectors. For example, the production of petrol and petroleum-based products, used as fuel in transportation and machinery, etc. Commodities are easily exchangeable with each other if they are of the same type. For example, crude oil from one source is the same as from any other source and is used for the same purposes. There might be slight differences in qualities when comparing crude oil from different sources but it, for the most part, is the same material. To get enlisted in the stock market for exchange, crude oil or any other commodity must meet a certain set minimum elemental and quality standards. These standard are also known as a basis grade.


The commodity market affects almost all aspects of our daily lives. Crude oil is used nearly everywhere from petrol pumps, malls, central cooling systems, etc. Prices of commodities like crude oil influence the world economy on almost every level. Each day, commodities worth billions of dollars are traded globally, making them the most important class of assets in the world.


Hence it is very important that if you are planning to trade in crude oil you should sign up for crude oil tips from the advisories of repute, like Shyam Advisory.


How is crude oil traded in the market?


Commodities are traded in stock markets as well as futures markets. Real-time prices are associated with spot markets. For example, current spot prices of crude oil can show as $5000 per barrel. This means that crude oil can be bought for immediate delivery at that price at that time.

Businesses and producers usually opt for spot prices as they use the commodities for the production of final goods. This is why they agree to buy commodities at spot prices immediately.


And as an alternate, commodities are also traded in the futures markets. Speculators and investors generally opt for this market. In a futures contract for crude oil, it is not traded for immediate delivery. Rather a contract is signed in which the buying and selling of crude oil are done at a determined time in the future. A futures contract for crude oil specifies a fixed date and price on which the transaction will be completed. Most of the time, no actual physical delivery of the commodity takes place because investors generally square it off or rollover in early on to take advantage of unrealized profits on positions.


When getting just started in the commodity stock markets, people can be easily distracted by the possibilities of making fast money. It is essential to remember that successful or skillful trading in any sector or market is not gambling. One must always properly assess and calculate the risks involved before placing any real money trade orders. Trading should be viewed as a full-time business rather than a side job. If traders, sellers, and buyers who are just beginning do not grasp this mindset, great losses follow almost from the very start.


A few crude oil tips for futures trading


Futures contracts involving crude oil prove to be highly volatile. Here is a list of tips you should remember when making a trade-in oil futures:


•    The price of crude oil can be influenced by the price of heating oil and unleaded gas.


•    The demand is statistically highest during winter and summer seasons. A very harsh summer or high use of transport (say, trips or vacations) will increase the demand for crude oil in the market resulting in a steady increase in the prices.


•    Or if it is an extreme winter, it will create high demands for heating oil or fuel for heating systems- which is made from crude oil. The northeast part of the country uses more heating oil than any other.


•    Keep an eye on oil production increases or cuts from OPEC, it determines the global supply for crude oil.


For more information, sign up on Shyam Advisory and claim your free trial now!