Trading the Crude Oil Market
Not so long ago crude oil looked like it was on an unstoppable march back to the $100 barrel level. The price of a barrel of crude had not been that high since September 2008.
At the moment though, in the middle of 2010, we find ourselves slap bang in the centre of the price range we have been trading for the last seven months. $100 seems a long way away.
Looking at the charts there is good price support around the $74.00/74.50 area. Although as Simon Denham of Financial Spreads commented, “Unfortunately, the 12 and 15 month bull trend lines have been broken. If we stay below $78.50 per barrel for too long the pressure for a bigger downward shift may begin to grow.
“Oil seems to have detached itself from the movements of other commodities like gold. The fears of Europe’s sovereign debt problems are supporting high gold prices but taking their toll on oil prices”.
If you are looking to trade the commodities markets then you need to be careful. The simple truth is that if you speculate on the markets you are likely to lose some trades. Whichever form of investment you use, whether you speculate on stocks, online CFDs or start spread trading you can lose money.
So where can you go if you are looking to trade the financial markets? What if you are only willing to risk part of your funds, but certainly not the bank? In Europe many investors are turning to financial spread trading. As just mentioned, there are downsides to all forms of investing and with spread trading you need to be especially careful because you can lose more than your original stake.
And as the warnings tell you, ’spread trading carries a high level of risk. Before you trade, ensure that spread trading matches your investment objectives. Familiarise yourself with the risks. Where necessary, seek independent advice’.
Wise words indeed but spread trading does lend itself to trading the oil markets. A key advantage with spread trading is that it offers a wide range of markets that you can speculate on including foreign exchange, indices and equities markets. Naturally you can trade both crude oil and gold.
Also in contrast with more traditional share trading, can take short positions on a market. Financial spread trading offers you the option of trading in either direction. Accordingly, if you think that the price of a barrel of oil will rise, you can speculate on it to rise. Should you believe that the price of crude is going to fall then you can short the market, ie you can speculate on it to fall.
Like most investors you will want to keep your costs low and your profits high. If you are day trading stocks and shares then you will normally incur broker’s fees or similar commissions. When financial spread trading, your trades do not incur any such fees.
Importantly note that spread trading is not subject to tax*. You do not buy or sell any actual resources, shares or assets. Instead you are merely speculating on the future price of your chosen market.
You could be thinking to yourself, this sounds good but where’s the catch? Well, as we discussed above, there are risks. Always be careful when trading the markets.
* Based on UK tax law. If you pay tax in another jurisdiction then tax law may vary.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.