Crude oil is an integral part of how societies function.
It is already integrated in the different systems that comprise our everyday lives.
You most likely have come across oil, gasoline, etc. at one point of your life – and are already familiar with it.
Are you also aware that not only can you make use of it as a product, but it could also function as one that provides you profit?
Yes it can, so you better read the rest of this article.
To begin with:
Commodities are just raw materials that could be bought and sold in the marketplace.
These raw materials tend to be further manufactured and produce other end products to be distributed and purchased by the public – the end products are the ones you are more familiar with.
Here’s the deal:
Because of the consuming public’s demand, these commodities are continuously traded in the market; thus this constant activity creates these price fluctuations due to varying shifts between supply and demand.
Crude oil is but one of the different kinds of fossil fuels. It is then refined and processed into other products like diesel, gasoline, or other of its petrochemical variations.
But one thing’s for sure:
Crude oil has a limited supply – because it is a non-renewable resource – thus its supply-demand dynamics would be in constant motion.
Looking at the chart below, you’ll see how volatile this commodity market can be:
Such volatility and the liquidity brought about by the participation of plenty of traders make it an ideal instrument to trade in and out of, regardless of the market’s general trend.
Crude oil traders could participate in the market’s price action by buying and selling spot contracts and/or futures contracts. Spot contracts are those contracts whose prices reflect that of the current market price of crude oil.
Whereas, futures contracts are those whose prices represent the prices that buyers are willing to pay for, with a delivery date that has been set in the future. Kindly remember that the price of a futures contract is not an assurance that crude oil’s price will match that once the agreed-upon date has come.
Futures contracts are used as either risk management tools (hedging) or as pieces for speculation.
Check out this introductory video about the crude oil markets:
Crude oil CFDs
Let’s not forget:
Contracts for differences (CFD) are types of derivatives.
But before we go any further, here’s a quick 101 on derivatives:
Derivatives are financial instruments whose prices are derived from the prices of their underlying assets (in this case, crude oil).
The execution of a CFD transaction involves a process wherein the payment of the opening and closing prices are to be done in cash.
It is an agreement to exchange the difference in valuation between the contract’s price when it was opened and its price once it was finally closed.
In addition to that…
CFDs are also advantageous to traders because it is more efficient in time and cost; because other than cash, there is no transfer that happens during the transaction.
Unlike in stock trading where a transfer of shares is involved or in the trading of some commodities where there is a transfer of actual physical goods.
Here’s a short video intro that explains more what CFDs are all about:
CFDs allow crude oil traders to speculate on what the price action that is likely to occur in the future (based upon their analysis, of course).
Trading CFDs prove to be advantageous because they provide crude oil traders profit opportunities regardless of the market’s general direction.
You could either go long (buy at a lower price then be able to sell at a higher price for a profit) or go short (sell when the price was still relatively higher, then be able to buy back what you sold at a lower price for a profit).
These financial instruments also allow traders to be diversified (good way to manage risk) and be exposed to more opportunities.
If that introduction to trading CFDs and crude oil piqued your interest, then there’s not much more time to waste, don’t you agree?
Go to AvaTrade right this instant by following this link: www.avatrade.com and create your account or you can simply click on the button below so we can take you directly to their crude oil page:
What is AvaTrade?
AvaTrade has established itself as one of the major players in the industry since its inception in 2006.
With core values such as integrity and innovation, they are known to always put you, their customer, first.
They currently have 200,000+ registered traders located around the globe (which will soon increase as soon as you get on board), placing more than 2 million trades per month.
As a testament to it being recognized as one of the major players, it is one of the partners of the Manchester City Football Club.
It is licensed as a fully regulated broker in EU, Japan, Australia, South Africa, and the British Virgin Islands – that’s spanning five continents!
And as another proof that they have your best interests in mind is that they make security as one of their priorities. Their data encryption, an embedded True-Site identity assurance seal, is WebTrust compliant, and has implemented a system to prevent credit card fraud and identity theft).
They have segregated your money (as a client), from their company’s business funds and AvaTrade also was one of the first forex brokers to introduce CFD trading (on stocks, indices, and of course, commodities).
They sure know how to innovate, don’t they?
They also put emphasis on serving you, their client, by assigning a dedicated account manager to guide you once you’ve deposited funds in your account. They also have a customer support team who can be contacted via different channels (phone, email, chat, and social media) to assist you should you encounter any issues.
Let us now look into AvaTrade’s features in greater detail. Alternatively, you may also check out our comprehensive review by clicking here.
AvaTrade offers several platforms wherein you could execute your trades.
While many other brokers only have their web-based platforms, with Avatrade you get to choose which platform among the following is more convenient for you to trade on: MetaTrader4/Metatrader5 application, webplatform, or AvaTradeGo (their mobile application).
Although the platform’s web layout is not as simplistic in its design as other brokers have, because you might need to access your data through another application (Metatrader series), or do another log-in to access the WebTrader platform, it is rest assured that it contains a lot more data for you to analyze on.
Another advantage of the platform incorporating MetaTrader is that eventually, you could use ExpertAdvisor trading bots (automated trading) that will help you streamline your trading needs in the future.
The whole end-to-end process of creating an account with AvaTrade, depositing money, trade execution, and the subsequent withdrawal of funds is all pretty easy to do.
With signing up (or logging in), you are given the option of not only registering your email address, but you could also do that using your existing Facebook or Google account credentials.
That helps with the convenience part. You also have the option to create a demo account for you to practice your analysis and strategies before risking your hard-earned money in the market.
Once you’ve logged in to their platform, the My Account page would, by default, show up. There, it will show your different accounts (real account and demo account).
You may select the account of your choice and choose to either download the MetaTrader application or connect with their web trading interface. Let us focus only on the WebTrader component here. Click that and you will be transferred to their webtrading screen (MetaTrader interface as well), which will ask for another set of log-in credentials.
Once you’re in that screen, you will find the price chart on the main pane, with the list of financial instruments on the left pane. By default, only the forex pairs are initially shown.
You need to right click on the left pane, and select symbols, then look for CFD Oil, then select Crude Oil. In order to place an order, you could double-click Crude Oil and the order pane will show up. There are lots of financial instruments ranging from forex pairs, CFDs, to cryptocurrencies, etc. to choose from in the AvaTrade platform.
Pros and Cons
- Spread of up to 0.02 (for Pro users)
- Lots if integrated trading tools
- Allows ExperAdvisor or automated trading tools
- Competitive bid-ask spreads
- Take profit and stop loss features
- No price alerts
Let’s first talk about the pros:
Incorporating MetaTrader to their platform is an advantage for AvaTrade because it allows you access to plenty of trading tools that will help you in your analysis.
The cool thing is:
And you also have the option to use ExpertAdvisor, or an automated trading tool, once you have the necessary experience to do so.
They also offer competitive bid-ask spreads so that you will not be drastically affected by slippages if ever markets’ volatility rises up a notch.
Lastly, they also have take profit and stop loss features, helping you to manage your trades better.
Now let’s talk about the cons:
You may find that the platform is not as simple to navigate around at first, because it is designed for traders who really use price charts.
But after maybe a couple of sessions, you will be accustomed and will be able to leverage the many advantages that Metatrader offers.
We also found that the platform doesn’t have price alerts.
AvaTrade also put emphasis on education as it has several topics that will help you be better prepared.
- Trading for beginners
- Economic indicators
- Trading video tutorials
- Forex e-book
You may access the educational section through this link: www.avatrade.com/education
How to trade crude oil CFDs using AvaTrade
The AvaTrade platform focuses more on the execution part, opting for more charting and trading features.
But after a couple of visits, then you’ll quickly familiarize yourself and be able to take advantage of its more advanced features.
Kindly note that you need to do the required analysis before executing your trade.
Double-click on Crude Oil from the list of names located on the left pane. A new window will pop up where you need to enter the following:
- Volume of your order.
- For market orders: Select if you’ll buy or sell.
- For limit orders: Place the value that you would want for your trade to be triggered. Then select whether you will buy or sell.
- Place your stop loss order.
- Place your take profit order.
Interested to Trade Crude Oil?
We can’t emphasize enough…
Sign up with Avatrade now and take advantage of the superior features that their platform’s interface has to offer.
You will be equipped with the tools and the education to make informed trading decisions giving you that advantage as you will be competing with other crude oil traders around the world.
Please be always reminded that it is very important to manage your risk.