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How to trade oil CFD products
CFDs are an excellent way to engage in crude oil trading.
The first step for trading energy CFDs is learning how they work. Here are the features of these contracts.
- Contracts for difference (CFDs) are derivatives. They track the underlying market, but they do not convey ownership of an asset.
- CFDs obligate you to pay or receive the difference in price between the time you open a position and the time you close it. For example, if you open a Brent crude oil spot CFD (XBR/USD) position at $97 and close it at $99, you profit $2. However, if you open at $97 and close at $95, you lose $2.
- CFD brokers almost always allow leverage trading. You can borrow money from the broker to increase the size of your position. You must pay back every cent you borrow, even for a losing trade. Therefore, it is possible to lose your money than you have in your account when trading an oil CFD. TMGM offers leverage of up to 1:100, meaning you can control $100 in contracts for every $1 invested in your position.
- Unlike options and futures, CFDs do not technically expire. However, there could be fees associated with holding them for the long term.
- CFD energy trading can involve contracts tracking spot markets or futures markets. TMGM offers access to Brent and WTI crude oil spot markets with our contracts.
Frequently Ask Question
Oil CFD prices change depending on several factors, the most
obvious being supply and demand. Events that can increase or
decrease supply and demand include:
- Refinery shutdowns, oil pipeline issues, or conflicts that limit oil extraction and export.
- A country deciding to reduce their oil output. News reports and other announcements can indicate when these decisions may occur.
- Decisions made by the Organisation of the Petroleum Exporting Countries (OPEC) can also affect oil prices.
If you trade CFD products, you can enjoy several advantages,
including:
- These products provide access to spot markets, which are typically out of reach for individual retail traders.
- Energy CFDs have low capital requirements.
- CFDs allow you to use leverage to target profits from small market moves and take larger positions with limited capital.
Crude oil is the most liquid energy market, and you will have a wealth
of information, data, and reports to inform your trading.