Hi guys, welcome to today’s blog. In this blog we are going to talk about on how you can recognise a opportunity to make money on trading oil while taking into account your risk of loss.
Trading Oil Step 1: Recognise the market condition
When you are trading as with many other traders, you would want to maximize your profit. For every dollar that you invest you want gain as much as possible right? In order to do this you will need a broker that gives you leverage or provide you tools such as options or CFDs. Many brokers like Plus500, Instaforex and Markets.com gives you the opportunity to trade and invest. These brokers mentioned also give you the ability to make trade in oil. Keep in mind that not all brokers give you the ability to make trade in oil. So now let’s talk about oil!
When you look at the oil chart (above), the first thing you need to do is to determine the current trend of oil. There are three kinds of trends.
Up trend is also often called Bullish trend. In a Up trend Oil price goes higher and higher after every small downgrade in prize. You can recognise a up trend by the following: each cycles their top goes higher then the previous cycle. And the bottom of each cycle goes up as well.
In this situation each prize cycle doesn’t show much of a price difference each cycle. Therefore its better not trade in this situation because the risk reward ratio is too small.
In a down trend the price cycle of for example oil is going lower after each cycle. For example oil price today is 48 usd. Yesterday it was 52 usd and the day before yesterday oil price was 56 usd. The down trend is often called as bearish trend.
For more information on trends you can read here: Trend Lines
Trading Oil step 2
The next step in making money with trading oil is recognise a entry point to the trade. For most people this is difficult because they don’t determine the market condition first. Once you have recognise the market trend. Its very easy to determine the price point for you to invest in the trade. All you need to do is buy at the point when you think the next cycle will start. Often the best point to buy is the ”corners” under normal market condition.
Trading Oil Step 3
In this final step you are going to determine what your exit point (selling pirce) is and decide if it is worth to make a trade. So how to determine your exit point of your trade? Just take a look at the market cycles. For me the best way to exit a trade is by taking my profits before the price reach to a next key turning point( corners). Because if I wait till after the “corner” point then there is a good chance that I will lose my profit because the price trend might change. There is a big chance that it goes into the opposite direction of what I wanted. Therefore it is better take my profit before the price at that key turning point price level.
When you have determine what you entry point ( investing price point level) and what your exit point is. That way you can see what your potential profit is. If the profit potential is too small then don’t trade. And if the potential profit is big then start a trade. Al right guys hope this have helped you a better understanding in trading. If there are any question please post it in the comment section. I will get too it as soon as possible. Have a series of successful trades ladies and gentlemen.