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How to Trade Oil CFDs: A Comprehensive Guide


The oil and gas industry encompasses different types of oil, such as crude oil, no-lead gasoline, natural gas, and heating oils. Among these, crude oil remains the largest and most widely traded sector, sourced from various points of origin worldwide. Due to its extensive trading volume and diverse sources, crude oil is susceptible to geographic, political, and economic factors that make its market highly volatile. This volatility presents both risks and opportunities for traders interested in capitalising on the oil market. 

The world’s biggest oil producers (2021) in million barrels per day.

The world’s biggest oil producers (2021) in million barrels per day

Understanding Oil CFDs 

CFDs are derivative financial products that allow traders to gain exposure to a market, such as oil, without owning the underlying asset. Unlike physical trading, oil CFDs derive their profitability from speculating on price fluctuations rather than the buying and selling of the actual commodity. 

Successful trading of oil CFDs requires a deep understanding of market trends, factors driving price movements, and the ability to predict market dynamics. 

What Are Oil CFDs? 

Oil CFDs enable traders to access the expansive oil market through leverage, offering increased exposure without the need to possess the physical asset. This increased exposure can diversify investment portfolios and reduce overall risk. Oil CFDs serve as conduits for trading in oil spot prices, oil futures, and oil options. 

The most commonly traded benchmarks for crude oil CFDs are West Texas Intermediate (WTI) and Brent Crude Oil. 

Differentiating WTI and Brent Crude Oil 

When trading oil CFDs, it is important to familiarise yourself with the two primary types of crude oil in the global market: WTI Crude Oil and Brent Crude Oil. These crude oils are rated based on their density and sulphur content, which impacts their quality and refining costs. 

Brent Crude Oil 

WTI Crude Oil  

How to Trade Oil CFDs: A Comprehensive Guide

Trading Oil CFDs: Key Steps 

To start trading oil CFDs, it is essential to follow a structured approach: 

Trading Oil CFD Futures 

In addition to trading spot prices, oil CFDs also provide access to oil futures. Oil CFD futures are over-the-counter derivatives based on future contracts. These contracts allow traders to speculate on the future price of oil at a predetermined date. Trading oil CFD futures involves understanding the intricacies of futures markets, contract expiration, and factors that influence their prices. 

Oil CFD futures are over-the-counter derivatives based on future contracts

Pros and Cons of Oil CFDs 

As with any trading method, oil CFDs have their own advantages and disadvantages, which you’ll need to weigh up before you get started. 

Pros: 

Trading oil CFDs requires you to trade with leverage, which means traders only have to place a percentage margin of the full trade value as a deposit. This can give you increased exposure in oil markets and has the potential to maximise your profits.  

Cons: 

Learn with VT Markets 

VT Markets is a provider of comprehensive trading services, offering demo trading accounts using the popular MetaTrader platforms. These demo accounts enable traders to experience realistic trading environments, access powerful trading tools, analyse market trends, and receive professional support. By leveraging these resources, traders can develop their trading style and gain confidence in trading oil CFDs effectively. 

Summary: 

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