What are the most popular strategies used in crude oil futures ?
Crude oil is one of the most significant resource and also acts as an important financial tool for hedgers, investors and traders across the globe. To trade in this commodity , traders are required to have good patience and give attention to market updates. Crude oil tips can also be used to trade safely and earn good returns.As it is known for high volatility and price swings, often traders witness that crude oil futures were trading down in the morning but at the time of day end it closed at a new high. To make profit from these fluctuations traders use different strategies in which they believe will help them in earning better.
Some of the most popularly used trading strategies are discussed below :
Buy and hold
This is the most widely used trading strategy. As prices of crude oil keeps on fluctuating , there are several factors which are responsible for it. Some of them are demand and supply, economic conditions, geopolitical factors and more. Traders and investors perform fundamental analysis by carefully analyzing these factors and conclude in which direction price movements are most likely to take place . If they are expecting price rise they buy oil futures and vice versa.Making precise prediction under this strategy is must. If in-case price movements does not takes place in the direction in which it is expected then traders may end earning losses for themselves.
Under swing trading strategy traders take long position in the market for short durations, as swing traders depends upon minor changes in price of crude oil.They analyze market trend and buy a futures contract if market is trending up and sell if it is trending down. Using this strategy traders try to make profit from small movements in market.
Traders buy two contracts while using this trading strategy which includes a buy contract and a sell contract of farther month . Traders basically aim to earn good profit with the help of expected change in price of both the contracts. This strategy is not used very frequently.
Traders try to formulate their investment decision by using technical indicators under this strategy.
Bar charts, candlesticks and other indicators are used to determine in which direction price movements will take place. Based on analysis they decide whether to buy or sell a crude oil futures.
These are some of the strategies which are used while trading in crude oil futures.Traders depending upon their risk bearing capability and trading goals decides most suitable trading strategy. Along with gold, crude oil is also among the most popularly traded commodity over the exchange. Beginners of market should first learn how to invest in shares & commodities before beginning trading . For becoming a successful trader some extra efforts are required.