Article

Crude Oil Trading: Guide for Beginners

Crude oil is one of the world's most actively traded commodities, offering traders significant opportunities due to its price volatility, liquidity, and global economic importance. As a beginner entering this market, understanding the fundamentals and developing appropriate strategies is essential for success. Whether you're an experienced trader looking to diversify your portfolio or a newcomer interested in tapping into the world's most traded commodity, this guide will equip you with the essential knowledge and practical steps to start trading crude oil effectively.
QUICK LINK TO CONTENT
1. How Forex Trading Works with TMGM
2. How Profit is Calculated:
3. Opening the Position
4. Closing the Position
5. Why Trade Forex with TMGM?
6. Transparent Spreads
7. Major Currency Pairs
8. Explore more about Forex with TMGM

Understanding Crude Oil Markets

Figure 1: Brent and WTI

Crude oil is naturally unrefined petroleum and is the raw material for gasoline, diesel, and plastics. As a finite resource with fluctuating supply and demand, its price can experience significant volatility, creating opportunities for traders worldwide. The global oil market operates 24 hours a day across different exchanges, with prices reflecting complex interactions between producers, consumers, and speculators.

Two primary benchmarks dominate the global crude oil market. West Texas Intermediate (WTI) is the US benchmark known for being light and sweet (low sulfur content), making it ideal for gasoline refining. It's primarily traded on the New York Mercantile Exchange (NYMEX). Brent Crude is the international benchmark extracted from the North Sea. 

It's slightly heavier than WTI and traded on the Intercontinental Exchange (ICE). Other essential oil types include Dubai/Oman crude, the Middle East benchmark, and the OPEC Reference Basket, representing a weighted average of oils produced by OPEC members.

What Moves Crude Oil Prices?

Understanding the key factors influencing crude oil prices is essential for successful trading. Supply-side factors include decisions by OPEC (Organization of Petroleum Exporting Countries), which controls a significant share of global oil production. Their output decisions can cause major price swings. Additionally, weekly inventory data from the U.S. Energy Information Administration (EIA) influences prices as traders react to changes in supply. Geopolitical events, such as conflicts or disruptions in oil-producing regions, can cause sudden price spikes.

On the demand side, economic growth plays a big role—strong economies require more energy, increasing oil demand. Seasonal trends also matter, with higher consumption during the summer driving season and winter heating months. Another important factor is currency fluctuations—since oil is priced in U.S. dollars, a stronger dollar makes oil more expensive for foreign buyers, potentially lowering demand and pushing prices down.


Figure 2: What to Know When Getting into Crude Oil


Ways to Trade Crude Oil

There are different ways to trade oil, each with unique benefits and risks.

  • CFDs (Contracts for Difference): A popular option for beginners, oil CFDs allow traders to speculate on price movements without owning physical oil. CFDs require lower capital and offer long and short positions, meaning traders can profit from rising and falling prices. They also eliminate concerns about storage or delivery.

  • Oil Futures: These contracts set a price for oil to be bought or sold at a future date. They require higher capital and a solid understanding of contract expirations but are favored by experienced traders.

  • Options Contracts: These provide the right (but not obligation) to buy or sell oil at a set price. While risk is limited to the premium paid, understanding how options pricing works is key.

  • ETFs (Exchange-Traded Funds): A simpler option, oil ETFs track oil prices or invest in oil companies, allowing traders to gain exposure to the oil market through a standard brokerage account.

How to Get Started with Oil Trading

Figure 3: Popular Trading Strategies

  1. Educate Yourself: Learn about oil price drivers, trading strategies, and technical analysis to better time your trades. Follow industry reports and news sources to stay updated.

  2. Choose Your Trading Method: Determine if CFDs, futures, or ETFs best match your capital, risk tolerance, and trading goals. Beginners often start with CFDs due to their flexibility and lower capital requirements.

  3. Select a Reputable Broker: Look for a broker that is regulated, offers competitive pricing, has an easy-to-use platform, and offers strong customer support. A demo account is also helpful for practicing.

  4. Create a Trading Plan: Set clear entry and exit points, risk management rules, and profit targets to maintain discipline.

  5. Practice on a Demo Account: Before trading real money, test strategies in a risk-free environment to build confidence and refine your approach.

  6. Start Small and Scale Up: Once ready, begin with small trades and gradually increase position sizes as you gain experience.

Risk Management in Oil Trading

Because oil prices can be highly volatile, risk management is essential:

  • Position Sizing: Never risk more than 1-2% of your capital per trade to prevent major losses.

  • Stop-Loss Orders: Always set stop-loss levels to close a losing trade at a predetermined price automatically.

  • Leverage Control: While leverage can boost profits, it also magnifies losses. Use it cautiously.

  • Diversification: Don’t put all your capital into oil—consider balancing your portfolio with other assets to reduce risk.

Avoiding Common Beginner Mistakes

Many new traders struggle due to:

  • Overtrading: Trading too frequently can lead to poor decision-making and increased costs. Focus on high-probability setups.

  • Ignoring Fundamentals: Price movements aren’t just about charts—inventory data, OPEC decisions, and economic trends all matter.

  • Emotional Trading: Fear and greed can lead to panic selling or holding losing trades too long. Stick to your plan.

  • Lack of Preparation: Jumping into real trading without sufficient knowledge often leads to losses. Invest time in learning and practice first.

Best Times to Trade Oil

Oil prices are most active during these times:

  • EIA Inventory Reports: Released on Wednesdays at 10:30 AM ET, often causing sharp price movements.

  • OPEC Meetings: Production decisions made during these meetings can significantly shift oil prices.

  • Market Hours: The most liquid trading hours are during U.S. market times (9:00 AM - 2:30 PM ET) and when the U.S. and European markets overlap (8:00 AM - 11:00 AM ET).

Taking Your Oil Trading to the Next Level

Once you’ve mastered the basics, you can explore more advanced strategies:

  • Correlations with Other Markets: Oil prices often move concerning USD/CAD (a currency pair of an oil-exporting country) and energy sector stocks.

  • Long-Term Cycles: Oil follows multi-year price cycles due to technological advancements, supply growth, and demand shifts.

  • Seasonal Trends: Patterns like increased summer demand or winter refinery maintenance can create predictable price movements.

  • Multiple Timeframe Analysis: Use different timeframes to identify long-term trends, medium-term trend phases, and short-term entry points.

Figure 4: Steps to Buying and Selling Crude Oil

Steps to Buying and Selling Crude Oil

  1. Understand what oil trading is

  2. Learn what moves the price of oil

  3. Decide how you want to trade oil

  4. Create your trading account

  5. Find your opportunity

  6. Open your first oil trade

  7. Monitor and close your position

Why Choose TMGM for Oil CFD Trading

TMGM offers a superior oil trading experience with our advanced CFD trading platform, designed to give traders the edge in volatile oil markets. When you trade oil CFDs with TMGM, you gain access to:

Competitive Advantages

  • Tight Spreads: Trade oil CFDs with some of the most competitive spreads in the industry, maximizing your profit potential in each position.

  • Advanced Execution Technology: Our state-of-the-art trading infrastructure ensures rapid execution with minimal slippage, even during high market volatility.

  • High Leverage Options: Trade oil with leverage of up to 1:20, allowing you to take larger positions with a smaller initial capital outlay.

  • Negative Balance Protection: Trade confidently, knowing your account cannot go below zero, regardless of market conditions.

Comprehensive Oil Markets

TMGM offers trading opportunities in the energy sector through Contracts for Difference (CFDs) on major oil markets. Specifically, traders can access CFDs on Brent Crude Oil (XBRUSD) and WTI Crude Oil (XTIUSD) spot markets. 

These products allow traders to speculate on oil price movements without purchasing the physical commodity. With leverage options up to 1:200, TMGM provides a platform for new and experienced traders to engage in the global oil markets.

TMGM provides advanced trading tools and educational resources to enhance oil trading. Traders can access 50+ technical indicators, a trading calendar for key events, and risk management tools like stop losses and trailing stops. The mobile app ensures seamless trading on the go.

For education, TMGM offers market analysis, live webinars, video tutorials, and trading guides, equipping traders with insights and strategies for informed decision-making in the oil market.

Our multilingual support team is available 24/5 to assist with any questions or concerns, ensuring you have all the support you need throughout your trading journey.


Trade Oil with TMGM 

 Diversify your portfolio by trading CFDs on the largest oil markets.


Learn more button links to https://www.tmgm.com/en/energies

Trade Smarter Today

$10,000 Demo Funds
100+ Markets
Low Fees, Tight Spreads
Trading App
Join Over 1,000,000 clients on our award-winning trading platform
1
Apply for a Live
Account
2
Fund Your
Account
3
Start Trading
Instantly
Open Account