Oil futures trading is an incredibly volatile and potentially profitable market. However, it is not for dilettantes; you’ll need patience and a significant amount of capital to get involved.URL :theinvestorscentre.co.uk
The oil market is based on fundamentals, and the laws of supply and demand dictate price movement. But it’s also a market that’s affected by news events, such as tensions in the Middle East, and by investor emotion. The most commonly traded oil contracts are West Texas Intermediate crude, which trades on the New York Mercantile Exchange under the ticker symbol ‘WTI’, and Brent Crude, which trades on the Intercontinental Exchange under the ticker symbol ‘BRN’.
How Geopolitics Impact Oil Futures Trading: A Deep Dive
A futures contract is an agreement between two parties to buy or sell a certain number of barrels at a specific rate on a specified date. Traders use the futures market as a way to speculate on what oil will cost in the future, while end-users, such as airlines, buy the futures contracts in order to lock in fuel costs.
When trading crude oil futures, you can either take a long position (buy the contract) or a short position (sell it). A long position makes money if the price of oil goes up, and a short position is profit if the price falls. Both positions are traded through a brokerage firm that offers futures trading and is SEC and FINRA regulated. You can also invest in oil-related ETFs to gain indirect exposure to the market, without the need for a margin account.