A Brief Introduction to Oil Trading

Oil is one of the most important commodities being traded today.  It has been used since the ancient times but the invention of the internal combustion engine as well as the growth of the automobile industry realized its value rise. Eventually, people found a way to extract the oil at a viable rate and as a result, the market grew and encouraged investors and traders to speculate on oil prices. Today, oil offers itself as a profitable capital market which traders invest with. 

Oil trading has some similarities with currency trading. With it, you can profit whether the prices are rising or falling. You can also take advantage of leveraging which means that you can control tens of thousands of worth of oil for pennies on the dollar.  Moreover, oil, along with other commodities have intrinsic value and will not go bankrupt unlike stocks.

What Affects Oil Prices?

Since a great quantity of oil reserves can be found only in a few countries, the market price of oil can be greatly affected by national and international politics. Even mundane circumstances such as seasonal changes in the temperatures or even elections can dictate the prices of oil. Any change in major foreign policy needs to be considered by oil traders in addition to several economic factors when trying to predict oil prices.  This is important especially considering how volatile the oil market has become over the past few years.  According to some oil traders, this is mostly due to the frequent moving from a physical group of companies trading to a financial-based situation.

Trading with Oil

While most Forex traders and stock investors rely on analyst notes and computerized trading systems, oil traders on the other hand rely greatly on the most updated news about national and international events. They spend most of their days chatting to different types of people ranging from other oil traders to specialist oil trading journalists. In most cases, gathering information is more than just half the job. Executing the trades is almost always a small part of the job in comparison.

Nowadays, most brokerage companies offer a trading platform for crude oil traders.  The platform includes all the necessary components for brokerage services through the Internet including the back office as well as the dealing desk.

When it comes to choosing a brokerage service, there are a number of things that traders or those who are looking to get started in oil trading need to consider. With the many services out there, choosing the right one can be a bit easier if the trader knows what to look out for. It’s always a good idea to make sure that sending and receiving money from the brokerage service is secure and easy. Most brokerage services offer a number of methods to send and receive money so traders can choose the one that is most convenient for them.