Your capital is at risk.
Trading crude oil has attracted many participants over the years.
Do not allow yourself to be left behind when it comes to being aboard this investment vehicle.
And you could start by reading this article. Let’s dive in!
Commodities are, more often than not, raw materials that are being bought and sold in the market.
These materials are used as inputs to create additional end-products.
Want some proof?
Checkout this latest graph showing the price movement of the crude oil markets:
As you can see from this graph, crude oil prices are highly volatile and tend to fluctuate based on a number of market and non-market factors.
Crude oil is a kind of fossil fuel which could be processed into different end-products that could then be sold to consumers, like gasoline, diesel, and/or other petrochemical adaptations.
Since crude oil is a non-renewable resource (limited resource), hence:
Its market price will be constantly be dictated by the changing movement of supply and demand.
Its volatility makes it one of the favorite instruments of market participants because it creates ample opportunities for them to profit REGARDLESS of the market’s general direction.
Market participants could engage in the market’s price action by:
- Buying and selling spot contracts (the spot contract’s price is crude oil’s current market price).
- Futures (wherein the contract’s price is the price in which the buyers are willing to pay for that particular crude oil contract on a future delivery date).
Do keep in mind:
The futures contract’s price is NEVER guaranteed that crude oil would eventually be able to reach that price once the agreed-upon date has come.
Futures are used as hedges (a risk-management tool), or as an avenue for speculation.
Now here’s a minute and half video clip about the future of oil and where it is heading:
Crude oil CFDs
Before we continue, we want to emphasize that CFDs or “contract for difference” are examples of derivatives.
A brief background on derivatives:
Derivatives are financial instruments whose prices are being derived from that of individual assets (in this particular case, the asset being crude oil).
Executing a CFD transaction is a process where the settlement of the opening and closing prices are to be settled in cash.
It is an arrangement (or contract) to exchange the valuation difference between the contract’s price when it was opened and the contract’s price when it was eventually closed.
In addition to that:
There is no actual transfer of shares (like in stock trading), nor a transfer of physical goods (like in some scenarios when trading commodities) that occur.
These are pure contract transactions; hence this makes the trading process more efficient (in terms of time and cost).
CFDs also enable crude oil traders to speculate and then to trade (the manner that they execute would be based on their analysis and previous testing) the price action of the underlying products (i.e. crude oil).
Crude oil traders use these CFDs, or other derivatives, to bet on whether the price of crude oil will rise or decline in value.
CFD products are also beneficial to crude oil traders because in that they could profit regardless of the general market’s direction (whether markets are trending up or down).
These products allow traders to:
- Go long: Profit if the price is rising as traders will be able to sell higher.
- Go short: Profit if the price is declining as traders will be able to buy at a lower price what they previously sold at a higher price.
CFDs allow crude oil traders to be exposed to more opportunities and where risk is more comparatively managed as a form of diversification.
Have we caught your attention yet?
We’re sure we did.
Since we’ve caught your interest in exploring this rewarding yet challenging world of trading crude oil CFDs, then you should go visit eToro right this instant.
What is eToro?
The company is one of the leading brokers of currencies and CFDs.
Also, they introduced the FIRST social trading platform, and it is the world’s leading social trading network.
For more than 10 years, eToro has been a leader in the global Fintech movement. They started out back in 2007 with the mission of making trading accessible to anyone and anywhere.
The point is:
They set out to disrupt the status quo of trading back then.
It is a fully regulated broker, as it adheres to the strict guidelines of different regulatory bodies such as:
- CySEC – Cyprus Securities and Exchange Commission
- FCA – Financial Conduct Authority
- ASIC – Australian Securities and Investments Commission
It is committed in its goal for continuous innovation, integrity, security, and excellence.
This is also evidenced by the company taking every precaution to keep your information and funds secure by engaging the highest standards of cyber security, and having the funds secured in tier 1 European banks.
That’s definitely not all…
Let us now proceed with discussing the awesome features of eToro in detail.
As a platform, it is safe to say that eToro is fairly easy to navigate around and simple to use.
The WHOLE process of creating an account, depositing funds, executing trades, and withdrawing your money is easy to do.
Let us take signing-up as an example:
You would also have the option of signing-up via your Facebook or Google accounts, aside from the usual process of registering an email address.
The overall layout of the page also offers simplicity and efficiency, as the financial instruments are ready to be chosen from on the main window.
The default list shown is your “Watchlist”, so any financial instrument that you have prioritized would show up there.
Here’s the thing:
You may add or remove a name from your default Watchlist or you could even create a new one.
Pretty cool, right?
If you would like to add crude oil to the list so that you could monitor it, you may use the search bar or click add markets (could be found once you scroll to the bottom of the instrument list), then locate the category where the instrument is included in (i.e. oil is under commodities).
And you know what’s even cooler?
There are lots of other financial instrument options to choose from, ranging from currencies, commodities, indices, stocks, ETFs and the newest one: cryptos.
Pros and Cons
- View and copy successful crude oil traders
- Social networking features
- Competitive bid-ask spreads
- Price alerts
- Risk management tools
- Charts not included in main interface
- Lauching ProCharts requires a few more clicks
Let’s first talk about the pros:
First of all, it is worth noting that:
A feature that eToro has pioneered in is social trading.
How can you actually use this?
You may view and copy the trades of other successful traders.
An objective is to leverage the social media-like features, like building a strong community of traders and investors, an avenue for sharing of wisdom and learning from trades – whether they may be successful and not.
It leverages the advantages of the features of a broker platform and a social media platform, to offer the utmost service to you, as it also rewards the traders whose trades are being copied.
They also offer competitive bid-ask spreads so as for you to not be greatly affected by slippages should markets turn volatile.
It also has alerts that could be set-up to remind you should the prices reach a certain point. This feature will allow you to be notified should the price near a certain price threshold.
The platform also has take profit and stop loss features. These are risk management tools that could be used in order better manage your trades.
Now let’s talk about the cons:
First of all, the charts are not included in the main page.
You will have to click the gear icon located on the upper right and click Launch ProCharts.
ProCharts could also be launched by clicking the line chart next to the asset’s name.
For those who prefer using technicals or price action in analyzing the possible price movements, this added step might be a disadvantage for them.
The platform also has an education section to help you better be prepared in analyzing and executing your trades.
But that’s not all…
This section includes daily updates on what happened to the markets, FinTech concepts (i.e. how to trade CFDs, currencies, etc), and a primer to social trading.
How to trade crude oil CFDs using eToro
The platform’s simple yet robust features make it very easy for you to trade crude oil CFDs.
Assuming that you already have done the necessary analysis beforehand, simply select OIL and then click TRADE.
You will then be prompted to a screen where you will have options to:
- Choose which transaction to do: buy or sell.
- What kind of order: market rate or a limit order.
- The amount you would like to bet.
- The leverage that you would like to use (x1, x2, or x5).
- Set a stop loss order.
- Set a take profit order.
Interested to Trade Crude Oil?
Don’t be left behind and participate in one of the most actively traded markets globally!
Trade crude oil now using eToro’s simple-to-use features and do take advantage of the platform’s innovation such as its social trading feature to maximize the potential profits that you can gain from this precious commodity.
However, please do note to always manage your risk.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.