How to trade oil

How does the oil market work?Fortunately, you do not need to deal with large quantities of crude oil in order to trade in the oil markets. This is because most oil and gas trades are made through futures contracts.

What are oil futures?Oil futures contracts are contracts through which you agree to exchange a specified amount of oil at a specified price on a specific date. These contracts are traded on the futures exchanges, which is the most used method for buying and selling oil.

While oil importers and exporters use futures contracts as a kind of security against the adverse effects of oil price fluctuations, traders can use these contracts to speculate on oil without having to buy or sell the commodity itself. This is because oil futures prices will move with an increase or decrease in the value of oil.

Therefore, instead of buying and storing oil, waiting for prices to rise and then selling and arranging how to deliver it, you can buy a future contract and then sell it before it expires. By doing this, you will benefit from the same increase in price, without making the same logistical effort.

Oil options contractsOil options are similar to futures, but there is one major difference. With oil options contracts, you have the right to purchase a specific amount of oil before the specified date through a specific price - except that you are not obligated to trade when you do not want to. Option contracts also provide a way to trade oil price movements without having to hand over the commodity itself.

Find out more about the options.

Where are oil futures traded?Oil futures are traded on the stock exchanges, as are stocks. However, it differs from it as it is traded in the standard types of oil. The oil is not extracted from the ground on the same body all over the world, and the standard types of oil allow traders to quickly identify the quality of the oil they are buying and selling and the location of its extraction.

The two most famous of these types, Brent Crude Oil and West Texas Intermediate, are traded on the Intercontinental Exchange and the New York Mercantile Exchange. You can trade both types with NSFX, along with other types of oil and gas including: heating oil, London gas oil, natural gas and unleaded gasoline.

What are the spot prices for oil?Spot oil prices indicate the cost of buying or selling crude oil and immediate delivery - or on the spot - rather than a specific date in the future. While the futures prices reflect the prevailing belief in the market of what the value of oil will be when the term of the future contract expires, the spot prices indicate the present value.

Markets sell buy the differenceOil - Brent Crude4078.44081.29.9Oil - US Crude3812.53815.3-1.7Heating Oil119861201651Natural Gas17061709-1The above prices are subject to our website terms and conditions. Prices are indicative only.

Three ways to trade oilThere are three main ways of speculating on oil price movements: futures and options, contracts for difference, or investing in stocks and mutual funds traded on the exchange.

Purchase of futures and options contractsTo trade futures and options, you will need to use the correct stock exchange for the standard types of oil you want to trade. Most of the stock exchanges are characterized by setting standards for the individuals allowed to trade in them, and therefore, most of the speculation on futures contracts is carried out by experts instead of individuals. If you wish to trade options, you will need an options broker.

Trading across contracts for differenceCFD trading allows you to trade the price changes that occur in futures and options, but without making a purchase or sale of the contracts themselves. Instead of trading on commodity exchanges, you create an account with a leverage provider. This gives the oil traders many benefits.

You can trade on spot prices for standard types of oil, as well as futures and options.You can buy and sell in a wide range of oil markets, on one platform.You are not required to be a seasoned trader in order to start tradingFind out more about how CFD trading works.

Investing in oilYou can get exposure to what is oil, through shares of oil companies and oil funds traded on the exchange, instead of trading in individual markets. Oil companies' prices are highly influenced by oil prices, and they can sometimes offer good value compared to oil trading per se. You can use the traded oil funds to invest in standard types of oil, or in a basket of oil stocks.

How to make your first trade with NSFX1. Create an accountIn order to be able to trade oil prices with NSFX, you will need to create an account. There is no obligation to fund once you have created an account.

But you will need to deposit the balances before doing your first trade. Financing a CFD trading account is easy. You can use a debit card or bank transfer if you are a retail customer, or use both a debit card, credit card, and bank transfer if you are a professional customer.

If you want to try trading oil without risking your capital, you can create a demo account. The demo account contains $ 10,000 of pre-established virtual money, which you can use to trade in the direct oil markets.

2. Find your first chance

You can use your account to trade Brent crude and WTI (called light U.S. crude on the platform), as well as heating oil, London gas oil, natural gas and unleaded gasoline. You can access a variety of tools to help identify the appropriate times to open your first position, including: