How to Use Signals in Oil Trading

As the demand for crude oil is growing, so is its price. As a result of this continuing industrialization, the oil commodity market is rapidly developing. A recent invention is the so-called exchange traded funds, or ETFs, that are devoted to oil alone, but traders can benefit greatly from both.

Some of the major players (buyers and sellers) on the crude oil market are WTI (West Texas Intermediate), Brent, Dubai, OPEC Reference Basket, WCS (Western Canadian Select), and Urals Oil. The oil ETFs traded in the US stock markets are USO (United States Oil Fund), DCR, UCR, OIL (Goldman Sachs Crude Oil Total Return ETN) and DBO (PowerShares DB Oil Fund).

Like stocks, exchange traded funds are traded in stock exchanges solely, which means you cannot use them as you would units of mutual funds. This also means that you can reliably analyze and track the price movement of oil ETFs through charts and thus identify oil trading signals.

Charts and signals

You will need several charts at various moments in time for each of your stocks so that you can identify both long and short term trend indicators, as well as profit taking zones and resistance levels. To make things easier, there are online subscriptions that alert traders by emailing them signals about the best times to sell and to buy. These are all useful tools for anyone looking to make a profit and minimize risk.

Oil advisories are a handy way of staying in touch with any political instabilities, conflicts or natural calamities going on in oil producing countries and/ or their neighbors. Such events have great influence on the price of oil, so keeping up to date with them is very important if you are serious about trading. Oil prices may also be influenced by any decisions made by the 12 OPEC members.

Predictions

In order to increase your profit, you will have to correctly predict the future direction of crude oil prices. For example, if the medium-term is and remains down, you should get trading signals for short positions.

When a short position is likely to become unprofitable, your best bet is to exit and re-enter the position in a few days, when the price is more favorable. This way, you stand a chance of cashing in on bigger overall profits.

Dealing with one losing trade every now and then is alright, as long as the bulk of your trades are winning trades. Sometimes, one temporary loss may actually increase your overall profits.

It is important to do your homework thoroughly, and your efficiency may reach 80%. Avoid aiming for 100% efficiency, since this impossible goal will only make you risk too much or not at all.

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