OIL FUTURES TRADING

Oil Futures Trading



Oil Futures Trading

Introduction

For decades the oil market has been intrigued and troubled by the uncertainties in the prices. No other commodity displays the extent of volatility as oil does. For all businesses, where oil is an important input cost, the pricing of the end product becomes an issue. Not all businesses can pass on the volatility to the customer because pricing in a free economy is based on “what the market will bear” and not on costs. This poses a challenge for businesses. The aviation industry is a typical example where volatility dodges the final pricing of the ticket - yet the customer cannot wait for the pricing to be determined based on the cost of fuel, an important input cost. For the trader, be it an independent trader or part of a corporate set up volatility is a serious problem and he always looks around to find a solution to stabilize his bottom-line (Kaldor, 2005).

Future Trading Strategies

The three major types of futures trading strategies that the pros use - trendline trading, round and seasonal trading.

Trading trend

Quite simply, you want to trade with the trend - as in graphic patterns. Recognize market trends and pay less attention to the "noise" in the daily fluctuations. Markets tend to move in the direction of the trend over time, so try to trade against the trend would be almost suicidal. Place stop loss below the trendline and take profits when the market approaches the line of resistance.

Round of negotiations

To trade cycles effectively, you must first find a market with reliable cycles. Cycles reliable stock index futures include cycles of the week from 20 to 23 and 14-day cycle. As for the grain markets and livestock, the cycle of 9 to 11 months would be a good guide, and for contracts of gold and silver, the cycle of 28 days. Term interest rates follow a course of 32 days.

Trading seasonal

Trading can be a seasonal business methods more effective. While other business methods can have a strong theoretical support, they have little empirical evidence of success. However, the seasonal business method cannot be having almost no support theory, but tends to make the best empirically. This method works on the assumption that markets tend to peak or trough to certain months of the year. This is especially true in markets for commodities, where ...