Crude oil trades through two primary markets, Western Intermediate (WTI) and Brent. WTI originates in the U.S. Permian Basin and other local sources while Brent comes from more than a dozen fields in the North Atlantic. These varieties contain different sulfur content and API gravity, with lower WTI levels commonly called light sweet crude oil. Brent has become a better indicator of worldwide pricing in recent years, although WTI is now more heavily traded in the world futures markets (after two years of Brent volume leadership).
We normally trade WTI (ticker symbol: CL). The WTI Crude market is usually very volatile and can have large price swings which makes it a favorite for short-term speculation or day trading. This volatility can be a double-edged sword however. For retail traders using small lots (or contracts) is typically the way to start as the more contracts usually can be difficult to trade.
Every .01 cent is equal to $10. Therefore, a $0.50 move using 1 contract is $500. The trade above was using 2 contracts and netted $940 before commissions which are usually less than $5 and not something to worry about.
Our advice as a new trader is to be very cautious with crude oil futures, they can be very profitable but can turn dangerous quickly if you don't know what you're doing. Many retail traders jump into the futures markets with very little understanding of how they work or how to manage risk and can quickly lose thousands of dollars due to the leverage. However, the positive is that when mastered this market becomes amazing to trade.
We hope you enjoyed this article on trading crude oil futures.
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