Speculative trading oil forex

Liquidity: The futures market is very active with a large amount of trading, especially in the high volume contracts. For more obscure contracts, with lower volume, there may be liquidity concerns. Hedging: If you have an existing position in a commodity or stock, you can use a future contract to protect unrealized profit or minimize a loss. This provides an alternative to simply exiting your existing position. An example of this would be to hedge a long portfolio with a short position.

The standard account can either be an individual or joint account. You will also need to apply for, and be approved for, margin privileges in your account. This feature-packed trading platform lets you monitor the futures markets, plan your strategy, and implement it in one convenient, easy-to-use, and integrated place. One of the unique features of thinkorswim is custom futures pairing. Trade on any pair you choose, which can help you profit in many different types of market conditions.

In addition, TD Ameritrade has mobile trading technology, allowing you to not only monitor and manage your futures positions, but trade contracts right from your smartphone, mobile device, or iPad. Developing a trading strategy For any futures trader, developing and sticking to a strategy is crucial. Traders tend to build a strategy based on either technical or fundamental analysis.

As a result, demand for oil began falling. In the first quarter of , oil consumption averaged A drop in demand was worsened by the supply glut. On March 6, , Russia announced it would increase production in April To maintain its market share, OPEC announced it would also increase production. As storage facilities filled, prices plummeted into negative territory. This action still wasn't enough to convince traders that supply wouldn't outpace demand, and the price of oil continued downhill.

Even before Russia's invasion of Ukraine in early caused prices to skyrocket, crude oil was on the rise. Between August 29 and September 5, the U. It was the largest weekly hike in prices on record. One month later, Hurricane Rita impacted the Gulf states. Combined, the effects of the two storms reduced crude oil refinery inputs This was the lowest average output since March Oil Spills Surprisingly, oil spills don't cause higher prices.

For example, the Exxon-Valdez oil spill spewed 11 million gallons , barrels of oil. Although that had a devastating impact on the Alaskan coastline, it didn't threaten the world's oil supply or prices. The BP oil spill spewed 12 times the oil than the Exxon Valdez did, per barrel. Yet, oil and gas prices barely budged as a result. First, global demand was down thanks to a slow recovery from the financial crisis.

Second, even though nearly million gallons or 3. While this is a large amount of oil, it isn't very much when the percentage of the total oil used by the United States is considered. The United States consumed 7. Energy Information Administration—a little over In , the U. How World Crises Impact Oil Prices World crises in oil-producing countries, or concern about crises, dramatically increase oil prices.

This is because traders worry the crisis will limit oil supply, which increases demand and prices. Iran This is exactly what happened in January after inspectors found more proof that Iran was closer to building nuclear weapons capabilities. The United States and the European Union began financial sanctions; Iran responded by threatening to close the Strait of Hormuz a major oil shipping lane.

The United States responded with a promise to reopen the Strait with military force if necessary. Arab Spring World unrest also causes high oil prices. In March , investors became concerned about unrest in several countries, including Libya, Egypt, and Tunisia called the "Arab Spring". Oil prices also increased in mid when the Israel-Lebanon war raised fears of a potential threat of war with Iran.

Russia—Ukraine In February , despite efforts from leaders in the U. As Russia's assault on Ukraine continued, so did the steady rise of crude oil prices. The surge in prices was caused by fears about supply issues. According to the IEA, Russia is the world's largest oil exporter. In March , the U. In order to combat supply issues, the U.

The price of oil fluctuates according to three main factors: current supply, future supply, and expected global demand.

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In addition to currency risk, large-scale producers often open short positions via crude oil futures and options to limit downside market exposure. When WTI or Brent loses value, profits from outstanding short positions may partially or fully cancel deficits sustained from their business operations.

Speculation Consistently strong liquidity and volatility make the crude oil markets attractive venues to speculators. Policy moves, evolving supply-demand levels, and geopolitical strife can send WTI and Brent trending quickly. The results are often spiking volumes, volatility, and advanced opportunities for speculators to cash in on pricing swings.

A vast majority of speculators employ intraday, day, or swing trading methodologies. The reduced trade durations enable capital to be routinely freed up and reintroduced into the markets. This flexibility reduces the opportunity costs involved with holding long-term investments.

Accordingly, buying and selling front-month crude oil futures and options is the ideal mode of trade for crude oil speculators. Barring the presence of a holiday session, the API report comes out Tuesday at p. Scheduled for delivery on Wednesdays at a. Production cuts or expansions, as well as price cuts or hikes, all have the potential of spiking volatility. Both speculators and hedgers trade the news regularly.

Hedgers often use long-term strategies, such as buying deferred-month put and call options , to limit exposure to unexpected moves in global supply and demand. This is typically done via buying or selling full-sized, mini, or E-mini Brent and WTI futures contracts. Established by renowned commodity trader Andy Daniels in , Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability. StoneX Financial Inc.

One of the most common traders found in these financial markets is a speculative trader. In this article, we will talk about speculative trading, how it is different from investing, and the advantages and disadvantages associated with it. Speculative Trading As the name suggests, this trading is specifically based on speculation.

In this, traders buy an asset or any other financial instrument based on the market price movement. Here, investors make decisions based on the technical analysis of the price action of the market rather than the fundamental analysis of that security or asset. Some people believe that speculative trading is risky while others think it to be highly profitable.

However, both are not true always. As trading is based on speculation, you do not move in a single direction. If you expect a price to increase, you can buy. On the other hand, you can decide to sell when the price is expected to decrease. In investing, you mainly look for purchasing securities or contracts to increase in value.

Speculation And The Forex Market In speculative trading, when a trader purchases a foreign currency, it is termed as currency speculation. Here, an investor purchases a currency to sell it when the currency price appreciates. This market runs for 24 hours a day and an investor can buy and sell in seconds with high-speed electronic trading platforms. Speculators actively trade in the foreign currency exchange market due to several reasons. Firstly, this market has frequent fluctuations in the currency exchange rates on both intraday and long-term basis.

Further, this market also provides wide opportunities as there are various currency pairs available for trading. Also, as there is a high amount of leverage in forex, traders can generate substantial profits with a small amount of trading capital. Asset managers and hedge funds mainly dominate the forex market. Because of this reason, forex speculation is sometimes confused with hedging practices which means buying and selling a currency against market movements. Risks Involved In Speculation The risks involved in speculative trading involve an uncertain percentage of positive gains or negative loss on a particular investment.

However, you must understand that risks in the speculation is conscious or you can say it is a known risk. For example, a natural disaster happening is not a speculative risk but a fall in the value of an asset is a speculative risk. The purpose of financial trading is to earn rewards and even speculative risks can be dangerous in that sense. Thus, to be a good trader, you must learn to manage your risks properly to maximise your profits.

How To Speculate In Trading Speculation in trading can be done based on fundamental analysis or technical analysis. Every trading includes a technical analysis of its market based on different charts. This helps you determine the direction of the price. To speculate, you need to learn some of these technical indicators. Remember, speculative trading is short-term trading.

Thus, there is no need to analyse several years of financial data. This will not help you. There are speculators based on their trading style, directional view, and the type of trades they do. Based on trading style Day speculator: These speculators do not have any specific qualifications.

They are termed so because they trade often. Like other day traders , they also hold a position for a day and close when the trading session is over. Swing speculator: As opposed to the day speculator, a swing speculator holds the position for several weeks hoping that he or she will capitalise on the gains during that time.

For this, the trader will determine where the asset price will move and accordingly take a position. Based on the directional view Bullish speculator: A bullish speculator will buy securities with the hope of selling them at higher prices in the future.

The bullish speculator always expects the price to rise. Bearish speculator: This speculator expects the price to fall in the future. He will sell securities to repurchase them at a lower price in the future. Based on the type of trade: Speculators can make different types of trades and these can be: Future contracts: In this, buyers and seller sell their assets at a fixed price at a pre-set point in the future. The buyers buy their assets once the contract expires. Put and call options: In Put option, a contract owner has the right to sell their securities at an agreed price at a specific period.

On the other hand, in the call option, a trader can buy the asset before the contract expiry date at a previously agreed price. Short selling: In this, the trader speculates that the price of an asset will decrease in the future, and then take a position and short sells. You can manage your emotions by either putting a trailing stop or manually moving a stop when the price is moving in your favour.