Since oil supplanted coal as a source of energy for many of our societies’ needs (i.e. automobiles), it has been the consensus that oil is a valuable resource.
It has attracted, and still attracts many participants in the market.
Are you one of them? If not, would you like to be one of them?
Worry not as we have your back. Read on!
Generally, commodities are raw materials which are bought and sold in the marketplace. These in turn are being used to create further goods as end-products.
Considering that commodities have widespread uses in different societies, they are being actively traded.
This active trading creates constant movement in terms of price action basing on the sentiments of the traders, or more importantly – the dynamics of supply and demand.
Crude oil is a fossil fuel which could be processed into further goods and then could be sold to consumers such as: diesel, gasoline, or other petrochemical variations.
It is known that crude oil is a limited resource (the supply is limited); hence its market price will be in constant movement that is brought about by the supply-demand interaction.
Look at this chart and notice how the price of this commodity has varied greatly over the past years:
And the good news?
That particular volatility is attractive to traders as that gives them enough opportunities to profit.
These market players could participate in the market’s price action by trading (buying and selling) spot contracts and/or futures.
Spot contracts are contracts wherein the contract’s price is the current market price of crude oil, while futures are contracts wherein whose prices are those that the buyers are willing to pay for a future delivery date.
Please bear in mind that:
The prices of futures contracts are NEVER guaranteed to have the price of crude oil match them once the delivery date has arrived. Instead, futures are being by traders used to hedge – or to manage risk – or as a space to speculate.
Crude oil CFDs
Contracts for differences – or better known as CFDs – are examples of derivatives.
A derivative maybe is an uncommon term for you, so let us discuss it further.
To begin with…
Derivatives are also financial instruments but whose prices are being derived from separate entities (the individual assets for which they are based upon – in this case crude oil).
Implementing a CFD transaction involves a process wherein the settlement is based on the difference 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 first opened and the contract’s price once it was closed.
Here’s a short but very informational video that explains what CFD is:
The trading process is more efficient in terms of cost and time than trading other instruments as it does not involve transfer of anything.
Unlike when trading stocks – wherein there is a transfer of shares that’s being done; or in the case of commodities – wherein sometimes there is a transfer of physical goods taking place.
CFDs also permit traders to speculate about the possible future direction of the price action of crude oil and execute a trade basing on that analysis.
Crude oil traders use these CFD instruments – or other derivatives – to make bets on whether crude oil’s market price will go UP or go DOWN.
CFDs are also beneficial to crude oil market participants because they are able to profit no matter what the market’s general direction is (i.e. trending up or trending down); as CFDs allow crude oil traders to go long (buy and they could sell at a higher price for a profit), or go short instead (sell and buy back what they have earlier sold at a lower price for a profit).
Furthermore, these financial instruments enable these traders to manage their risk better and be exposed to more profit opportunities.
Why does this matter?
If you’re still reading this part, you surely are now interested in learning more and maybe even excited on making your first trade! Without further ado, let us introduce this awesome broker: Plus500.
You should go and create an account right now at www.plus500.com and explore its platform.
What is Plus500?
Plus500 is a leading provider of CFDs, bringing to you its trading resources on stocks, commodities, forex, ETFs, options, and indices, and the newest product to hit the financial markets: cryptocurrencies.
Plus500 is the platform being offered by Plus500UK Ltd, a UK-based company. The company, which was founded in 2008, is expanding quickly as a CFD provider not only in Europe but also in Asia.
It has currently over 2000 instruments which it offers to over a million clients.
In 2018, Plus500UK Ltd has joined the UK FTSE 250 index as a leading mid-cap company.
It is a publicly-listed company! Not bad, right?
It is regulated by the Financial Conduct Authority (FCA). FCA has rules and regulations to ensure that this broker offers top-quality and fair services to you and their other clients.
As another testament to their objective of transparency, Plus500 your (and all of their clients’) money are held in segregated client bank accounts to ensure that your money will be accounted for. It also offers 24/7 support should you have questions with your transactions.
It has your best interests in mind.
Let us now go over the different features of the Plus500 platform in detail.
It is a rather simple yet thorough platform. Plus500 made sure that your experience in the end-to-end process (creating an account, depositing funds, trade execution, and withdrawing money) is as smooth and as direct as possible.
Let us take creating an account as an example:
You are given the option of logging in via your existing Facebook or Google account, aside from registering your email address.
The characteristics of simplicity and thoroughness are evident upon seeing the over-all design of the platform.
Selected financial instruments are already displayed on the top pane. These instruments could be grouped via the following: their popularity (among majority of the clients), risers and fallers (the names whose prices moved the most), the type of financial instrument (commodities, Forex pairs, ETFs, Stocks, etc), and you could also create your own favourite list.
How could you add a financial instrument to your favourites?
At the right side of the instrument’s name (i.e. oil), there is a ☆ icon. Just click that icon, once it is filled, then that instrument is added to your list.
You also are given the option of directly searching for the instrument of your choice. This is done by typing the name on the search field located at the top.
Pros and Cons
- User-friendly platform
- Price alerts
- Integrated crude oil price charts
- Risk management tools
- Competitive bid-ask spreads
- Does not have limit order
Let’s first talk about the pros:
The main page pretty much has everything you will need. Not only is the list of financial assets already segregated as previously discussed, but you could also execute your trade directly from the main page. The buy and sell buttons are already located beside asset’s name.
There’s an alert icon also located at the right side of the asset’s name, you could set-up an alert for the name that you’re monitoring so as to be notified if it is nearing certain price thresholds even if you are not actively monitoring its price action.
The price charts are also shown immediately (located at the lower pane), thus you have an idea of what its current price action looks like at that very instant.
The price charts could also be modified by including your preferred technical indicators, or which time-frame you would like to see.
There are also stop loss orders and take profit orders that are available. These are tools that are being used to manage your trade, and your risk.
The bid-ask spreads offered are competitive to ensure that in the event of high volatility and low liquidity, you would not be greatly affected by slippages.
Now let’s talk about the cons:
There are specific regional restrictions that Plus500 do not offer its services to. When you access the Plus500 website, it will automatically notify you if their services are available in your country.
The platform only executes orders at the current market price; it does not have a limit order.
The platform has an economic calendar that not only shows country-specific macroeconomic scheduled announcements or reports, but also corporate announcements.
How can you actually use this?
This data will help you better prepare for certain macroeconomic news that may prove to be catalysts to price movement.
There are also a series of tutorial videos that you may find helpful to your trading journey (https://www.plus500.com/TradersGuide).
How to trade crude oil CFDs using Plus500
The platform’s straightforward yet complete features make it quite easy for you to trade crude oil CFDs.
Assuming that you already have performed the necessary analysis simply click Oil.
At the pane located at the right-side of the screen, you are given the options to:
- Choose which transaction to do: buy or sell.
- The amount you would like to bet.
- Set a stop loss order (Close at loss).
- Set a take profit order (Close at profit).
- There’s also an advanced section wherein you are given the option to set a trailing stop.
Interested to Trade Crude Oil?
We can’t emphasize enough that…
Crude oil is an actively-traded market; hence don’t be left behind while others take advantage of the profit opportunities this market provides.
Trade crude oil now using Plus500’s simple yet very thorough platform.
It is important though to manage your risk at all times.