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How to trade crude oil CFDs? Brent & WTI Crude Oil CFD Investing

2022-08-15
2215
In the trading market, there is a special trading product, that is, crude oil. You might see crude oil prices go up and down in one day. And this huge price volatility has also attracted a large number of investors.

Among the methods of investing in crude oil, most investors do not need to own physical crude oil. Investors can invest in crude oil through stocks, futures and CFDs.

If you are interested in investing in oil CFDs, then I think you can read our report carefully, which is definitely the most comprehensive investment education on crude oil CFDs.

What is a Crude Oil CFD (Contract for Difference)?




To understand what is crude oil CFD, we should first learn what is CFD contract for difference?

There are many investment methods on the market, but the underlying trading logic is to earn the difference. If you invest in stocks, it is nothing more than buying at low prices and selling at high prices; or if you invest in futures, you are only buying up and down. Of course, the delivery time of futures will make futures investment full of risks.

CFDs are also a two-way investment method, but there is no delivery time for futures, and the investment threshold is very low (usually $100 to enter), usually CFDs are considered to be the best way to deal with large price fluctuations during the trading day.

Speaking of crude oil CFDs, crude oil CFDs use crude oil as the target to conduct CFD transactions.

Investors buy up or down crude oil CFDs from investment institutions, and provide a certain amount of margin for leveraged trading. Investors can close the position at any time. If the closing price is as predicted by the previously purchased contract, then invest People make profits and vice versa.

Of course, it should be noted that although there is no transaction fee for CFDs, there are also transaction costs such as spreads (spreads) and overnight fees.

Brent and WTI crude


After understanding crude oil CFD, let's take a closer look at two crude oil products

Regular consumers often say that the gas price has gone up, so what determines the gas price at the gas station? For now, the world determines oil prices through benchmark oils. There are three major benchmark oils in the world: Brent, WTI and Dubai.

Brent crude oil is produced in the British North Sea. Benefiting from the convenience of maritime transportation, it is the benchmark oil with the greatest influence, and the oil prices in Europe and Africa are often determined by it.

WTI crude oil is produced in Texas, the United States, and it is the highest quality crude oil in the world, but because it is produced inland, it is mostly transported by pipeline, so the scope of influence is limited, and it is usually considered to determine the North American region. The benchmark oil for oil prices.

Dubai crude oil, produced in the Middle East, usually affects oil prices in Asia.

Therefore, the crude oil investment we often talk about is not really investing in crude oil, but investing in one of these three benchmark oils. But because the price of Brent crude oil is equivalent to two-thirds of the price of all crude oil in the world, what investors call crude oil investment often defaults to investing in Brent crude oil.

Simply put, crude oil CFDs are a big category, and the benchmark oil is the following Xiaolei. What you need to pay attention to is Brent crude oil and WTI crude oil, which is the target of your real investment.

Difference Between Brent Crude Oil and WTI Crude Oil


After clarifying the concept of Brent crude oil and WTI crude oil, we can look at the following two pictures:



August 11 UKOil


August 11 USOil

UKOil is British Brent crude oil, and USOil is American WTI crude oil. We can see that the price gap between the two is not too large, and the price trends are roughly the same. However, in addition to the different origins mentioned above, there are several differences that investors need to pay attention to.

geopolitics

Based on the different origins of Brent and WTI crude oil, investors should pay attention to news from different regions, such as the Uzbek-Soviet war, which has caused political tensions in Europe, and the price of Brent crude oil has skyrocketed. Another example is that because the storage capacity of the US oil storage institutions has reached its peak, and since no one can buy crude oil anymore, the price of WTI crude oil has plummeted.

So if you are investing in WTI oil, pay close attention to the news in the United States, and if you are investing in Brent crude oil, you must not miss the situation in Europe.

Exchange

Transactions must take place in specific venues, and new regulations set by these venues often affect the price of commodities. For Brent and WTI crude oil, the two are located on different exchanges. Brent is traded on ICE (Intercontinental Exchange) and West Texas Intermediate is traded on NYMEX (New York Mercantile Exchange).

In 2020, the New York Mercantile Exchange set new rules to allow commodity prices to be negative. Shortly after that, U.S. crude oil fell from $18 a barrel to -$38, and many investors who shorted WTI crude oil also made huge gains.

How to Trade CFDs on Brent Crude Oil and WTI Crude Oil


Above we have explained Brent crude oil, WTI crude oil and crude oil CFDs in detail. Next, we will teach in depth how to invest in Brent crude oil CFDs and WTI original CFDs.

If you still want to learn more about Brent crude oil and WTI crude oil, you can refer to our previous reports:

What are the historical prices of Brent crude oil? How to invest in Brent crude oil?

WTI crude oil price trend analysis/future forecast/investment recommendation


Of course, you can also subscribe to our website, we will push you the latest and most comprehensive research reports.

Whether you invest in Brent crude oil or WTI crude oil CFDs, you must go through this process to start trading.

Choose a CFD trading platform and register as a platform user (register CM Trade platform now, you can participate in platform activities, and participants have the opportunity to receive a bonus of up to 30,000 US dollars)

Download and install the trading software, CM Trade provides a clear interface trading software for Android and Iphone users, click here to download. Of course, if you are used to operating your transactions on a computer, CM Trade also provides MT4 trading software. You only need to download MT4, and CM Trade will transmit the key through the email to open the MT4 trading permission for you.

Studying the trading strategies and trading skills related to CFDs, we will not think that an investor who has just come into contact with CFDs will have the ability to make profits. CM Trade will regularly provide the most cutting-edge market consultation and professional skill analysis.

When everything is in place, look for investment opportunities and start your investment.

Precautions for investing in crude oil CFDs




We think that after understanding the steps to trade crude oil CFDs, there are other things you must know in CFD trading.

transaction cost

There are three main trading costs for CFDs: spreads, commissions and overnight fees.

The spread is well understood. For example, if the trading agency charges a spread of 0.05, the trader buys a long Brent CFD (the bid price is $10.164, and the sell price is $11.446). The trader earns a profit of 1.282, and the trading agency Charge 0.05 spread, then the trader's actual profit is 1.282-0.05=1.277.

Commission means that some trading institutions may charge a commission in addition to or in lieu of the spread. This is a percentage or fixed amount withdrawn from the transaction.

The last item is the overnight fee, which is an adjustment to the interest rate charged for holding long positions overnight, so most investors do not make long-term investments using CFDs.

The above is the transaction cost of trading CFDs. The good news is that you can trade CFDs through CM Trade. CM Trade does not charge commissions, and provides 3 levels of accounts for the ratio of the spread to meet the needs of various investors.

Risk of shorting

The characteristic of two-way trading is shorting, but the risk ratio of shorting is greater at most, the loss is controllable when longing, but the loss is uncontrollable when shorting.

Shorting in CFDs typically involves an investor borrowing the underlying asset from an institution, immediately selling it at the current market price, and then buying it back later to return it to the lender. If the market does fall, you can profit from the fall, but if the market rises, you will have to buy back the asset at a higher price and accept the loss.

Summarize


Whether you want to invest in WTI, Brent crude oil or hundreds of other markets, I think CM Trade trading platform is your best choice. CM Trade offers an easy-to-use and navigate charting platform, plus additional features like one-click trading, real-time trade monitoring, and real-time market updates that make your trading even easier.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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