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9 Reasons Why Trading Oil CFDs Is Popular

ByDave Stopher

Jun 29, 2022

Trading crude oil is an excellent opportunity for profit in most markets due to its unique position in the global economy and political system. Further, the energy sector has experienced significant fluctuations, suggesting that it can provide stable returns to both short-term swing traders and long-term investors. 

Without comprehensive knowledge of the energy markets, aFINA trader cannot take advantage of fluctuations in oil cfd prices. Many traders are unacquainted with these markets, and there are hidden traps that can steal their profits. 

CFDs: why do you trade them?

They’re derivatives you can trade. In other words, you would be dealing with prices determined by the market rather than the market underlying itself. 

  • Shortchanged 

It offers more flexibility than other forms of trading since it involves an agreement between you and the exchange of the difference between your opening and closing price. You can profit from both ups and downs in the market by doing so. Trading CFDs involves viewing the buy and sell prices on the trading platform. You should buy if you believe the market will rise, and you should sell if you believe it is going to fall. 

  • Extensive market coverage 

You can trade shares, commodities, indices, forex, cryptocurrencies, and options with CFDs. Trading can be done from a web browser, a mobile device, or a tablet. You don’t need to sign up for multiple platforms. Some markets are even available outside of trading hours so that you can catch company announcements outside of trading hours. Prices outside of opening hours may be different. 

  • Market similarity 

The point of CFDs is to mimic as closely as possible the trading environment of their underlying markets. CFDs of Apple shares, for example, let me explain. By buying a CFD of one Apple share, you buy 2000 Apple shares. If you trade CFDs on shares, you will not receive shareholder privileges because your positions will be adjusted to offset dividends. Forex CFDs require you to sell your quote currency for a certain amount of your base currency before buying it. A CFD on GBP/USD would expose you to the same risk as a $100,000 USD purchase. 

  • Shares hedging 

You own HSBC shares, and you intend to hold them for years to come. By using CFDs, you will mitigate the effect of the banking sector downturn. If HSBC shares drop in value, your CFD position will earn you a profit, offsetting your loss. A short position is then opened. CFD traders can be closed if your HSBC shares increase in value, and losses can be deducted from future profits for CGT purposes. 

  • DMA 

An advanced trading account allows direct market access (DMA). You can view stock exchange order books and forex providers this way. Instead of using IG’s buy or sell prices, you can view all offers and bids. There might be better prices, but it isn’t guaranteed, and only experienced traders should use it. IG will not apply if you use DMA – instead, you will be charged commissions. 

  • It’s simpler 

Day trading CFD markets are an attractive option for day traders because capital is not needed for day trading. Trading CFDs through a well-known and legitimate broker can also be easy and convenient for day traders. 

  • Liquidity 

Market makers are brokers as CFDs are traded over brokers. They provide a high level of liquidity compared to other options, such as futures contracts. 

  • Flexibility 

CFDs do not have a defined expiration date like futures contracts. If the trader has sufficient capital and there are no objections from the buyer or seller, a CFD trade can be extended indefinitely. 

  • Compelling trading costs 

You can trade oil prices with CFDs. CFDs eliminate the high cost of trading commodities. People trade gold and oil commonly so that traders can enter and exit trades at any time. 

Politics and economics do not affect other commodities like oil. Many factors affect oil supply and demand, including wars in oil-producing nations, government policies governing pipeline construction, and growth in oil production. 

Trading Oil CFDs using strict stop-out strategies prevents large losses when price changes suddenly. Whenever you trade oil CFDs, we recommend always using a stop-loss order to help maximize your profits.