Crude Oil Spread Betting Starter Tips
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With crude oil prices at record highs and large fluctuations in the prices on a daily (and sometimes hourly) basis the big question is How to make a profit out of trading Crude Oil?
- If you are new to trading Crude Oil then you can always start trading using a Demo Account or Practice Account. Spread betting companies like FinancialSpreads.com and Capital Spreads offer a free Practice Account that is based on their actual trading platform. In this case they put a virtual £10,000 in your Demo Account. The prices are delayed by 15 minutes but that should be fine if you are just practicing
- Make sure you trade for free ie without commissions or broker fees. With spread betting you can normally trade crude oil without any such fees
- Trade Crude Oil tax free. If you spread bet on the Crude Oil markets you get all the normal spread betting benefits and any profits you make from trading crude oil, whether you buy or sell, are tax free*
- The price of crude oil changes very quickly and it can be difficult to compare crude oil prices. However websites like Clean Financial lets investors compare the spreads on offer
- When trading for real make sure you have got live prices, these are often available for free. You may need to open a spread betting account but you do not normally need to place any bets in order to see the prices
- Many traders rely on live charts for their analysis. Some spread betting companies offer individual live charts for each of the 1000s of markets that they quote. For each market you can add trend lines to your charts, view by them by the minute, 10 minutes, hour, day etc in order to suit your trading needs
- If you are less comfortable with the Crude Oil markets or with spread betting, the best form of keeping your funds safe is not to speculate. If you do not trade you will not lose any spread trades. Of course that means you cannot profit either. Again a Demo account can be a good place to start
- So you want to trade but are worried about the potential losses? Then trade with small stakes. Companies like WorldSpreads will let you trade for as little as £1 per cent ($0.01). So if the price of Crude goes up or down 50 cents you will win or lose £50 depending upon whether you bought or sold the market. If the price shoots up $1.75 per barrel or drops $1.75 again you would win or lose $175 cents x £1 per cent = £175
Likewise if you bet £2 per cent and the market moves $1.25 then you would win / lose $125 cents x £2 per cent = £250
For a fully worked explanation on how to spread bet on Crude Oil see: Crude Oil Spread Betting
- Protection. You can also use Stop Losses and Guaranteed Stop Losses to protect yourself against big swings. These are ways of telling the online spread betting company to close your bet if the market moves against you. Some of the companies operate these in slightly different ways so check with your spread betting firm for details but essentially it works like this:
You are happy to risk £200 on Crude Oil. So you place a spread bet, for let’s say £1 per cent with a Stop Loss set so your maximum loss is £200. ie the price of Oil can move $2 against your position before your bet is closed
Some companies like Financial Spreads will not close your bet if the market moves in your favour. For example, if Crude moves a lot eg $2.75 (275 cents) then:
a) If it moves the way you bet by $2.75 then you would win 275 x £1 = £275,
b) If it moves against the way you bet by $2.75 your bet would be Stopped at $2 and you would only lose you 200 x £1 = £200
The penalty for this security is a slightly wider spread but the peace is mind is sometimes worth it. Note that a Guaranteed Stop Loss is ‘Guaranteed’. However a Stop Loss is ‘Not Guaranteed’ at the level you specify. If the markets move quickly or gap through prices then your Stop Loss may activated at the next price eg $2.12 rather than $2
- Find the trading platform that is right for you, there are plenty to choose from. There are still some download only versions however there are many web based platforms like IG Index, Financial Spreads that offer clients free real-time prices, charts, an easy to use interface, no commissions, stop loss orders, limit orders, one-cancels-the-other orders etc
Quick answers to common Crude Oil Spread Betting questions:
Q) Where can I Spread Bet on Crude Oil?
Q) Where can I Trade Crude Oil for Free?
Q) How to Spread Bet on Crude Oil?
Q) Where can I find Free Real-Time Crude Oil Prices?
Q) Where can I find Free Crude Oil Charts?
Q) Where can I find free Crude Oil Trading News?
Q) Where can I find Crude Oil Technical Analysis?
Q) Where can I find Narrow Crude Oil Spreads?
Q) Where can I find a Free Crude Oil Trading Platform / Software?
Q) Where can I find more information on US Crude Oil?
Q) Where can I find more information on Brent Crude Oil?
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Crude Oil Spread Betting Starter Tips' by DB, updated 01-Jul-08
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