Oil is one of the most abundant sources of energy on earth, and it will likely remain a popular investment in the future. Investors add oil as an asset to diversify their portfolio, but it also can be used as a hedge against certain positions. Also, today thanks to the rise of modern technology, there are even more options available for online trading. If you’re looking to get involved in oil trading, here we cover everything beginners should know before they get started.
Oil Trading Definition
Oil trading involves selling and buying oil for profit. But, because it is an asset with a finite supply, the price tends to fluctuate based on the position of the demand and supply. This volatility attracts a lot of new investors.
When it comes to the oil markets, you should know that they operate on futures contracts. In other words, you can buy and sell your barrel based on a price set in the future. More specifically, the buyers and sellers trade on a price that is not established today but on a future date.
Even though no one can know for sure the future price of the oil, because the futures are set on a monthly basis, investors are able to notice certain trends and make predictions based on these patterns. At the end of the day, a settlement price is reached, which is then considered as the benchmark for the calculation of the price of other oil contracts. So, that being said, there is no guarantee that oil will reach that price in the future.
Contracts for Difference
Contracts for Difference, as the name suggests, is a contract between a broker or a buyer and a seller, and according to the contract, the investor or the buyer needs to pay the other party the difference between the current value of the asset, in this case oil and the value based on the time of the contract. One great trading site that offers an option to trade Oil CFD is Oil Profit.
This is an AI-Powered trading system where you can earn a daily profit of up to 80%. Hence, it is a perfect option for retail investors. Even if you don’t have enough time or experience, as this is an auto-trading site, it is able to read large data sets and facilitate the trading process for you. You only need about 20 minutes on a daily basis in order to set up your account. It’s worth noting that on the site, there is also a semi-automated trading option. You can become a member by depositing $250.
In comparison to the futures, spot contracts are based on the current market price for oil. So, in other words, you will make an investment based on the most recent price of the oil. The spot market doesn’t make up a large portion of the overall oil market, but it is an important aspect in setting an up-to-date price of the oil.
The Bottom Line
In conclusion, thanks to the availability of online trading sites, you can start investing in oil and add it to your investment portfolio. As there are multiple options when it comes to oil trading, you can find one that suits your budget, financial goals and preferences.
Another advantage is that they are automated trading sites, which simplify the trading process and are great for beginners in this field. But it is equally important to familiarize yourself with the trends in the market, keep up with the latest news about the price of oil and only create an account on reliable trading sites.