pitfalls of trading oil in today’s market. Given the extreme difficulty in predicting whether the price of oil will rise or fall, trading oil-futures is a high risk strategy.
Only the Biggest Players are Successful
The largest speculators in the oil-futures markets are investment banks who get the lowest trading fees and the best prices on their trades. Simply put, they can buy lower and sell higher than any individual investor. Entering the oil-futures market as an individual investor is fraught with risk. A single contract for 1,000 barrels of oil will cost you nearly $10 Shea Weber Youth Jersey ,000 even before you consider the fees and commission of the stockbroker or online trading company. If the market moves against you, your entire account can be depleted in a single trade.
Specialist Software Stacks the Market Against You
Investment banks and trading firms operating in the oil-futures market don’t hire speculators out to make a quick buck. They hire traders who can reduce their risk and hedge against fluctuations in the oil prices. Professional energy traders use custom-designed software that is unavailable to independent traders. Traders are judged not by how much money they make, but by the quality and effectiveness of their risk management strategies. In oil-future trading, loses count against traders even if they are quickly reversed.
Exchange Fees and Commissions
Just like gambling, in oil-futures trading the house always holds an advantage. As an independent trader, finding the best online trading site will involve a lot of research. You will have to investigate the trading company’s background and their fees and commissions structures. Assuming that you started your trading account with $10 Max Pacioretty Womens Jersey ,000 and paid just $20 per contract per trade, you’ll be paying far higher proportionate transaction fees and commission that other traders on the oil futures market who have far higher account values.
Lower-risk Ways of Investing in Petroleum Products
You will still need open a brokerage account online or with a local firm. So, you should do due diligence and the research the firm and their investments before you invest by looking at the terms of the investments. Investing in oil should always be one small part of your portfolio and you should consider your risk tolerance. Whether you use a stockbroker or go it alone, your options include investing in a commodity exchange-traded fund, an oil royalty trust, or a mutual fund that holds oil company stock. Statistically Andrew Shaw Womens Jersey , these funds rarely beat the index as fees eat into your profits; buying into a tracker fund with no fees will still profit from any gains in the price of oil company’s shares. Apple’s fortune recently turned leaving Exxon Mobile as the world’s most valuable publically traded company; buying stock in big oil firms doesn’t always lead to large gains, though. Further ideas include buying stock in companies that transport oil or alternative energy companies.
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