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The Trader's Toolkit
Our blog provides essential trading and market insights to equip both new and seasoned traders with the tools they need to trade online.
ForexHow to Use an Economic Calendar to Enhance Your TradingIf you are trading any market, be it stocks or foreign exchange, you need an economic calendar. This is a schedule of dates of important news releases or events in the United States or other advanced countries that can influence the movement of forex pairs and the overall financial market. There are many places where you can keep a track of important dates, such as Bloomberg, MarketWatch, and Fortrade. How to Read an Economic Calendar
With a basic understanding of the worldwide financial markets, you can quickly scan through an economic calendar. But what exactly would you be looking for? So, for example, if you are waiting for the Federal Reserve's next move on interest rates, you would look for the next Federal Open Market Committee (FOMC) policy meeting. Or, if you want to know the next annual inflation reading in the United Kingdom, you would look for the next time the Office of National Statistics (ONS) releases the consumer price index (CPI).
Overall, any significant economic data or related events will be viewed on these calendars, such as those listed on our own economic calendar: Clicking on one of the events will allow you to see its previous history: As well as volatility: How Can It Help You Trade Better?
By using an economic calendar, you might be able to improve your trading skills in several different ways.
Focusing on Impactful Events
Economic calendars might help you concentrate on impactful events, such as the personal consumption expenditure (PCE) price index, a much-anticipated jobs report, or consumer inflation expectations. Of course, knowing which ones to monitor will require one of two things:
Understanding what the market is paying attention toResearching what experts are monitoring
» Need help? See our video tutorials and trading courses for beginners
Developing Good Strategies
Economic calendars might allow you to manufacture a good event strategy. In other words, if you have embarked upon day or swing trading, you need to keep track of significant economic data or events that might indicate price movements. This can also be beneficial since it will enable any volatility expectations, which can lead to profits (or losses).
Indeed, utilizing an economic calendar can enhance various trading strategies, such as scalping and pre-data trading.
» Open a Fortrade account
Scalping
Scalping is a trading strategy that specializes in profiting off of small price changes. Depending on the type of data or event and how much it defied expectations, there could be immense volumes in the financial markets, which is beneficial for scalping.
Pre-data Trading
Pre-data trading is when you make moves before the scheduled time. So, for example, the markets might be waiting on the U.S. central bank to announce a 25-basis-point hike to the benchmark federal funds rate. However, you think the Fed will either pause or execute a half-point increase. Either way, you are front-running the market and could generate potential profits if the price moves in your favor.
» Discover the basic forex terms you should know before trading
An Example
An economic calendar could perhaps give you a lead over other investors. Let's say that there is a crucial storage report for crude oil or natural gas from the U.S. Energy Information Administration (EIA) on Thursday, but the market is tanking or soaring two days before. Since you anticipate a significant build or withdrawal in domestic supplies, you tailor a strategy with this information. When the information is dropped, you can see that the numbers came in better or worse than what experts anticipated.
Put simply, you're looking ahead while others still focus on the current session. 4 Additional Tips
Here are four common trading mistakes to watch out for when relying on an economic calendar:
1. Misunderstanding the Importance
Novice investors might think a certain piece of data will be far more important than it is, especially as it relates to the instrument you have chosen. It is better to examine what other investors are saying before thinking that the Conference Board's Leading Economic Index (LEI) will result in a selloff.
2. Missing Events Due to Time Zones
Unfortunately, time zones can lead to you missing the data or an event's conclusion. The simple solution is to modify your calendar on your time.
3. Having No Strategy
So, you are waiting for Tesla Motors' next corporate earnings report. Investors expect terrible numbers, but you have been tracking Elon Musk's Twitter feed and think revenues, sales, and earnings per share (EPS) will top market estimates. For whatever reason, you did not use this knowledge to trade the price of Tesla stocks, potentially leaving some potential profit on the table.
4. Failing to Learn
A common mistake is not learning from these dates and how they correlate to the broader market movement. This could be a possibility to identify chart patterns, think about how the data affected the market, and determine how large or small the trading volumes were.
» Don't get caught out: Learn the fundamentals of CFD stock trading
Can Using the Calendar Improve Your Trading Skills?
In a simple answer: Yes. But it will depend on a laundry list of factors: understanding how critical the data will be, knowing how much the event will influence the market, and realizing how much it could help or hurt any of your positions. Overall, an economic calendar offers a myriad of benefits for any serious trader. Of course, it is more beneficial to active short-term investors than to passive long-term traders.
Stock tradingNew to Derivative Trading? Here's 5 Things to Keep in MindDerivatives are technically contracts between two parties. On their own, the contracts have no intrinsic value. Instead, a derivative’s price or value is based on its underlying instrument—hence the name. The underlying principle in a derivative contract is that Party A will owe Party B when the price of a certain instrument reaches a specific predefined point at a preset date.
Most Popular DerivativesCFDsFuturesSwaps
» Learn more: Our top derivative examples in forex Note: Fortrade offers the ability to trade the price changes of instruments with CFDs and NOT to buy/sell ownership of the instrument itself
1. Educate Yourself
This is an essential step before you start trading. There is surprisingly little in-depth information online about derivatives trading, so books are still the most reliable option for those seeking a solid understanding of derivatives.
Online courses are another option if you’d like to learn about derivatives trading on your own, at your own pace. There are also great courses on the topic for visual learners.
» Develop your trading skills: See our beginner trading courses and advanced trading courses
2. Develop a Strategy
Developing a trading plan and strategy is crucial to preparing to trade derivatives. Your strategy should ideally consider your risk tolerance, goals, and the type of derivative you wish to trade. Factors like:
Economic indicatorsMarket trendsGeopolitical events should also be considered, as these can impact the market
Remember to stick to your strategy as much as possible—trading can often lead to impulsive decisions when you get carried away by emotions or rattled by market fluctuations. A solid strategy will help you make level-headed decisions during crunch time.
3. Start Small and Gain Experience
Practicing with a demo account is a great way to learn the ropes of trading. Demo accounts give you a certain amount of virtual money that you can use to trade. You won’t have to use real money, but you can get a feel of how it is to trade live on your chosen platform.
When using a demo account, however, ensure that you treat the virtual money as if it were your real funds. This way, you won’t “train” yourself into taking risks you can’t afford. Trading psychology is a crucial factor to consider. Then, you can start trading with real money—but start small and gradually build it up as you master your strategy.
» Open a risk-free demo account with Fortrade
4. Practice Risk Management
Derivative trading is a high-risk, high-reward endeavour. Profits are typically higher than in traditional stock trading, but this also means that losses can be more profound. Ideally, you should have already included your profit targets, stop-loss orders, and entry and exit points in your strategy before going into live trading.
As mentioned earlier, you need to fully understand the risks involved when trading with derivatives and understand the market and your chosen derivative.
» New to volatility? Learn the risks and advantages of volatility trading 5. Keep Researching
Lastly, because trading can often be affected by trends and current events, you should always try to do constant research. Stay abreast of relevant news, economic indicators, and market trends that could impact your derivatives’ underlying assets.
» Use MT4? Make sure you know about the best indicator for MT4 mobile Start Your Journey
Derivatives trading involves a great deal of risk, so it’s important to have a solid strategy before going into live derivatives trading. As mentioned above, preparation, constant research, and practice will help you prepare for a rewarding derivatives trading experience.
Cfd tradingThe Mechanics of Equity CFDs: How They WorkEquity CFDs are contracts for difference (CFDs) that use stocks as underlying instruments. With equity CFDs, it is possible to achieve a targeted exposure to a specific stock and speculate the price movements of a stock.
Equity CFDs offer investors a capital-efficient way to gain exposure to a specific value and price direction as they trade on margin with a leverage effect. Do not confuse Equity CFDs with equity swaps, although there are similarities—such as the ability to potentially profit/loss from price movements without purchasing underlying instruments.
The main difference is that equity CFDs can be used for several instruments:
CurrenciesStocksCommodities
Equity swaps can only be used for equity and indices. Equity CFDs also do not have an expiry, unlike equity swaps.
Key Features and Characteristics of Equity CFDs
Note: Fortrade offers the ability to trade the price changes of instruments with CFDs and NOT to buy/sell ownership of the instrument itself
1. Price Tracking of Underlying Equity
Equity CFDs allow you to track the performance of an underlying market security. Your potential profit or loss is calculated based on the difference between the purchase and selling price. When you trade share CFDs, the spread is usually the same as the spread of the underlying security. This is called the bid and ask price when trading shares.
Brokerages typically base their equity CFD prices on the underlying instrument and only charge fees such as market spread, commission, and daily interest for holding long positions overnight.
2. Leverage and Margin Requirements
Equity CFDs allow you to trade on margin, which means you only need a small amount of money compared to the total value of the position. You can now trade equity CFDs on most global equities.
The initial margin for most liquid companies is 5%, while smaller stocks may require a deposit of 10% to 20%. In the case of particularly illiquid shares, the required margin may go up to 50% to reflect the higher risk.
You can trade contracts with a minimum size of one share, and the trading hours typically align with those of the underlying exchange.
3. Long and Short Positions
You can easily take a long or short position in the CFD market, which typically does not have short-selling rules. There’s also no borrowing or shorting cost since you, as an investor, don't technically own the underlying instrument.
Trading CFDs usually involves minimal fees, as brokers earn money from spreads. When buying, the trader pays the asking price; they take the bid price when selling or shorting. Brokerages take a portion of the potential profit from each quoted bid and asks price. 4. No Ownership of the Underlying Instruments
Let’s talk about ownership. With CFDs, you generally do not own or have ownership rights of the shares. Rather, you agree with the CFD provider to exchange a transaction's potential profit or loss. This means that although you hold a CFD related to a share, you do not have ownership or voting rights for the underlying share.
Equity CFDs, however, afford you the same rights as the owner of the underlying shares. This means you can receive cash dividends and be involved in stock splits, rights issues, or corporate takeover action—even if you don’t own the underlying shares.
» Are there trading terms you don't understand? Check out our helpful glossary for a quick explanation.
Why Do People Trade Equity CFDs?
Access to a Wide Range of Equities
CFDs provide investors access to a wide range of global equities in the UK, U.S., and European markets without owning physical shares. This allows you to trade with the stock movements without buying the underlying instrument.
Leveraged Exposure to Price Movements
With Equity CFDs, you can trade on leverage. For instance, you can take a position by depositing only 20% of the required capital, making trading more capital efficient. While this could lead to higher potential returns, it could also amplify the potential losses if the position moves in a direction you weren't expecting.
Option to Trade With the Rising and Falling Prices
You can either go long or short, trading on rising or falling prices. Unlike regular stock trading, where investors can only invest in rising prices, many brokerages do not permit short-selling.
» Open a free demo account with Fortrade
Start Trading Equity CFDs
Equity CFDs offer investors exposure to the stock market with minimal capital outlay and leverage. However, there is risk involved and it's crucial to understand how these contracts work before you decide to start trading.
Cfd tradingHow to Trade Brent Crude Oil CFDs Without ExperienceTrading Brent crude oil CFDs can be quite intimidating, especially if you have never done it before. This is because the oil market is known for being one of the most volatile markets out there, making it a possibility for traders to potentially turn a profit. However, it can also be risky, so having the right tools and strategies is essential.
Of course, trading oil in a traditional way is difficult, which is why we now have CFDs. This means that there's no need to handle physical contracts or invest in a physical asset, and you can trade with the price difference between opening and closing prices without actually owning instruments.
So, if you're ready to take the plunge and learn how to trade Brent crude oil CFDs without experience, read on. We'll cover everything you need to know, from the basics to strategies and tips. Trading Brent Crude Oil CFDs
Trading Brent crude oil through CFDs is often commission-free, with brokerages making a small profit from the spread. It sounds simple enough, but for beginners, it can be quite overwhelming. To help, we have broken down trading Brent crude oil CFDs into four steps:
Sign up for an account with a CFD trading platform
As a beginner, it's important to choose one that offers a wide range of tools and resources. Also, make sure to read the terms and conditions of the brokerage carefully before you commit to it. Download and install the trading platform on your device
This can be a mobile app, desktop app, or even a web-based platform, depending on what the brokerage offers. Deposit funds into your account
This can be done through a variety of methods, including credit cards, bank transfers, and e-wallets. Start opening and closing trades from the trading platform
You can choose to open long or short positions, depending on whether you think the price of Brent crude oil will go up or down.
Of course, there is much more to learn before you can trade confidently—like the basics of CFD trading, as well as some strategies and tips to help you make trades.
» Read more about trading crude oil CFDs in volatile markets What Affects the Potential of Brent Crude Oil CFDs?
When trading Brent crude oil CFDs, there are several factors that can affect the outcome. These include:
Supply and demand are particularly important when it comes to Brent crude oil. When demand exceeds supply, prices tend to increase. Conversely, if supply is higher than demand, prices tend to decrease. Political and economic events will also play a role in the price direction of Brent crude oil. For instance, news of trade agreements or major conflicts, such as the one in Ukraine, can have a direct effect on the price. The seasonality of supply and demand is also important to consider. For example, in winter months, demand for oil is usually higher, which causes prices to increase. Finally, speculation plays a crucial role in the price movement of Brent crude oil. Traders can use technical analysis tools, like support and resistance levels, to try and predict the future direction of prices, though there's no way to guarantee success.
It's worth mentioning that the cost of trading Brent crude oil CFDs can also vary depending on the type of brokerage you choose, as well as the amount of leverage you use. Of course, all of these factors can have a big effect on the potential of your trades, so it's important to monitor them closely.
Things to Know Before You Start
Before you start trading Brent crude oil CFDs, it's important to do your research and be aware of the risks involved. To get a sense of how CFD trading works, you need to understand the following:
The size of the trade
CFD trades are measured in lots, which are units of the underlying asset. The size of a lot will depend on the type of CFD you are trading, as well as the leverage offered by the brokerage. In most cases, the standard lot in Brent crude oil trading is 100 barrels. The trading costs
These include costs charged by CFD brokerages, like spreads, commissions, and swaps. So, before you start trading, make sure you know what kind of fees you will be charged for each trade. The difference between the opening and closing price of the trade
When you open a trade, the price of Brent crude oil will be your entry point. On the other hand, when you close the trade, the exit point is determined by the current market price. The difference between these two points is your potential profit or loss.
It is also important to practice proper risk management when trading CFDs. Setting stop-losses and take-profits prior to entering a trade will help you minimize losses in the event that prices move unexpectedly against your predictions.
» Find out more about trading commodities with Fortrade
Key Takeaway
We can conclude that trading Brent crude oil CFDs may earn a potential profit, but it's important to understand the risks involved before you start.
So, make sure to do your research, understand the different factors that can affect oil prices, and read the terms and conditions of your brokerage carefully. By following these steps, you can potentially improve your trading experience.
Stock tradingHow Geopolitical Events Influence Financial Market VolatilityVolatility is a crucial factor in financial markets. If stocks only marched in an upward direction with no risks involved, everyone would be jumping on the bandwagon to make a quick fortune. But, as we all know, that's not how it goes.
Unfortunately, volatility can spell trouble for investors and the wider economy, leading to wealth fluctuations and economic dips. So, what's behind this risk in the stock market? Well, one of the big contributors is geopolitical events. What Is a Geopolitical Event?
A geopolitical event is a significant incident where geography and politics intersect, potentially affecting the economy, financial markets, regional stability, global trade routes, and supply chains.
These events come in various forms, from regime changes to political unrest and military conflicts. They can also lead to trade disputes, sanctions, and uncertainty, impacting not just the entire stock market but also specific financial markets like commodities and foreign exchange.
Example
Russia's invasion of Ukraine had a profound impact on global energy and agricultural markets, causing significant spikes in the prices of crude oil, natural gas, and wheat. While the stock markets remained relatively stable, the commodities markets experienced ongoing volatility. Another example is the 2018 trade war between China and the U.S., which created substantial uncertainty, speculation, and fluctuations in stock prices due to tariff announcements, negotiations, and potential resolutions.
» Discover how to trade crude oil CFDs in a volatile market How Do World Events Affect the Stock Market?
1. Trader Sentiment
Geopolitical events can affect trader sentiment and alter risk perception. Whether armed conflicts or political stability, the bout of uncertainty can lead to fear among investors, resulting in a sharp selloff in stocks. At the same time, positive developments and peace agreements can bolster investor confidence and lead to potential upswings.
2. Economic Implications
Geopolitical turmoil can oftentimes shift to widespread economic implications that can have negative consequences for industries and businesses. So, if a major economy were to impose tariffs on another substantial economy, this would inevitably increase production costs and disrupt supply chains. Then, once the corporate quarterly reports are released, earnings and growth prospects take steep hits—depending on the company, it can lead to market reactions and stock price fluctuations.
3. Uncertainty
If there is one thing investors detest, it is uncertainty. It makes forecasting more difficult, business conditions can be challenging to anticipate, and traders are less inclined to execute investment decisions. Then, of course, the market reaction is mostly negative, and investors will primarily wait for every little development, from speeches to policy announcements.
4. Financial Stability
Geopolitical tensions can threaten financial stability by prompting governments to impose financial restrictions, limit cross-border credit, trade, and investment, and trigger capital outflows. Additionally, higher interest rates on government bonds can increase funding costs.
When Great Britain decided to leave the European Union (EU), it sparked significant volatility and uncertainty in global financial markets. European indexes were particularly affected due to concerns about economic consequences, trade disputes, and regulatory changes. While subsequent events like the coronavirus pandemic and conflicts in Eastern Europe have arisen, Brexit highlighted the substantial influence of geopolitical events on stock market volatility.
» Trading stock CFDs could be easy when you know the fundamentals Harnessing Geopolitical Events
Trading based on geopolitical events can offer both trading possibilities and challenges for short-term investors who engage in event trading. Some traders prefer geopolitical turmoil, such as those involved in commodities, while others find it frustrating and may reverse their investment decisions.
Note: Fortrade offers the ability to trade the price changes of instruments with CFDs and NOT to buy/sell ownership of the instrument itself
» Learn more about opening a Fortrade account
Cfd tradingTrading Silver CFDs: 7 Pros & Cons to Consider Among the variety of instrument classes available for trading, precious metal commodities like silver, gold, and copper have been consistently popular for many decades now. This is because they have been top-tier instruments thanks to their advantages, like their wide use cases as well as their low spreads when trading.
However, trading a precious metal like silver doesn't come without risks, so a trader needs to be aware of the cons that come with it too. Continue reading to learn about the pros and cons of trading with silver CFDs. Advantages of Trading Silver CFDs
Trading silver is incredibly popular among both beginners and experienced investors, as the metal has to have a wide range of advantages over other instruments. Let's go over them and see what these advantages are.
1. Silver Is a “Safe Haven” Instrument
Silver has long been a “safe haven” instrument, meaning that it tends to increase in value during times of economic crisis or uncertainty. This digital instrument is also considered to be more stable than some other instruments, which makes it appealing for investors looking for less risky investments.
This is much different than the stock market, for example, where prices rapidly can change in a matter of days and weeks.
2. It Has Diverse Technological Applications
The biggest reason behind silver's popularity as a metal is its many industrial applications. It is used in a wide range of industries including electronics, healthcare, aerospace, automotive, and more. This means that silver has the potential to continue its increase in value as more technological applications are developed.
3. Silver Is Highly Liquid
Unlike small-cap stocks, for example, silver is one of the most liquid markets out there, meaning that it's easier to buy and sell silver at any given time. This makes trading with silver CFDs much easier and more convenient compared to other instrument classes.
4. It Resists Inflation
Silver is a popular choice for traders who are looking to protect their assets against inflation. In fact, silver tends to remain stable or even increase in value during times of economic volatility, making it a possibility for those looking for an instrument that will help them stay ahead of inflation. Best Platforms—Utilize the power of MetaTrader4 and ProTraderPractice Trading Risk Free—use virtual money on our demo accountExpert Support—Consult with our experienced market experts Drawbacks of Trading Silver CFDs
Of course, trading silver CFDs is not without flaws, as there are some downsides that come with it too. Read on to understand the drawbacks of trading silver CFDs.
1. The Silver Market Is Volatile
While silver is often seen as a “safe haven” instrument, its market can be occasionally volatile. This means that even though it has the potential to increase in value during times of economic crises, it can also drop just as quickly. As such, traders need to be aware of the risks involved and take caution when trading with silver CFDs.
2. It is Vulnerable to Technological Changes
Due to silver’s wide range of applications, it can be vulnerable to technological changes and advances. Although the chance of this happening is low, new technologies may reduce the demand for silver, which could result in a decrease in its value. Thus, traders need to keep an eye out for any technological changes that might affect the price of silver in the future.
3. Monetary Policy Changes Affect the Silver Market
Changes in monetary policy and economic conditions can also have a big impact on the price of silver. As such, traders need to stay aware of any changes in the macroeconomic landscape that could its price. Final Words
Trading with silver CFDs is a potential way to diversify your portfolio and take advantage of its wide range of advantages. However, it’s important to keep in mind the drawbacks of trading with silver CFDs as well and make sure that you understand the risks involved. With the right knowledge and understanding, you can use silver CFDs to help you achieve your investment goals.
» Ready to start trading? Learn more about opening an account with Fortrade
ForexClose Positions in Trading: Everything You Need to KnowUnderstanding trading as a beginner requires learning the basics first, and there's no better way to start than with opening and closing positions. Namely, all instruments in the market move in price, and the asset's price is represented on a chart. This asset can grow in price, leading to the chart going up, or it can fall, leading to the chart going down.
Of course, traders can get potential profit from the market regardless of the chart's direction. Namely, a trader can open a long position, where you expect the price to go up, or a short position, where you expect it to go down—opening a sell trade to get potential profit from the price going down.
However, to profit from a trade, you must understand how you can properly close a position. So, let's see what closing a position means in more detail. What Is a Close Position in Trading?
Simply put, closing a position in trading means exiting an open trade and taking profits or losses accordingly. This can be done either manually if the trader is tracking their trades closely, or automatically with the help of stop-loss orders that could limit the risks on both long and short trades.
It's worth mentioning that there are many reasons why a trader would close a position. These include:
Taking profits from an open long or short position. Mitigating a potential loss, anticipating that the market is headed in the opposite direction. Preventing forced liquidation by the market or your brokerage. Adding liquidity to your account for a bigger position.
Short Selling
Short selling involves opening a position in an instrument with the expectation that it will fall in price, and closing it to take potential profits. To short sell, you first artificially "borrow" shares from your brokerage to open the position. When the time comes to close this position, you "return" these borrowed shares back to the brokerage, and any profits or losses are calculated accordingly.
Exiting a Long Position
The most common type of position is a long position, where you open a buy trade with the expectation that it will rise in price and close it to earn a potential profit in the price difference. To close such a position, the trader "exits" the market by reversing their trade, effectively selling the asset back to the brokerage at the current market price and earning potential profits. Exemptions
In some cases, traders are not required to close their position. This can happen if the instrument they used is subject to an expiration date, as with derivatives such as futures or options contracts. In these cases, the position is automatically closed when it reaches its predetermined expiration date, regardless of whether or not the trader would like to close it.
It's also worth mentioning that, in some cases, positions aren't closed voluntarily but forcefully by the brokerage or the market. This can happen due to improper risk management or extremely volatile market conditions.
The most common type of a force-close position is with a margin call, which is a demand by the brokerage to invest more cash or close the position. Failing to deposit more cash in your account when margin-called might cause a forced liquidation to happen in your account, making you close your positions with a loss.
» Read more about the differences between CFD and futures trading
Closed Position Example
Let's say a trader opens a long position on the price of Microsoft stock (MSFT), which is currently trading at $250 per share. After two days, the price of the stock rises to $255, and the trader decides that it's time to take potential profits, so they close their position. This action will result in the trader making a profit of $5 per share invested.
Let's explain this example in a step-by-step:
The trader sees a chance to potentially profit from the price of MSFT stock, anticipating that the share price will go up after a certain event (like Microsoft releasing a new product).Then, the trader opens a long position with their brokerage (where you buy low and sell high) and waits for an increase in price. Once the share price reaches the trader's expectations (for example, $255), the trader closes the position and takes the potential profits.
» Trade using the newest platforms. Learn more about opening a Fortrade account
Final Words
To summarize, closing positions refers to exiting an open trade and taking profits or losses accordingly. As you can see, positions can be closed either voluntarily or forcefully by the brokerage/market. This decision is based on multiple factors, like the trader's risk tolerance, current market conditions, as well as potential earning opportunities.
Whether you're in a long or a short position, learning how to close positions properly is essential.
Cfd tradingHow to Trade Crude Oil CFDs in a Volatile MarketAs an asset, crude oil has been one of the most important energy sources in the world for almost a century. In addition to powering vehicles, oil products are also used to heat buildings, produce electricity, and even as a material in creating certain products.
Because of this, oil has consistently held a relatively solid price over the last 50 years. However, since it's both sought-after and rare to find, oil is susceptible to price fluctuations, particularly after major macroeconomic events. What Is Crude Oil CFD Trading?
To trade with the price change of oil, you'd have to buy/sell it when it hits a low/high price and sell/buy it later for a potential profit/loss. However, unless you have the logistics to manage this (including storage and resources), buying and selling physical oil is a difficult feat. This is where crude oil CFDs come in.
Namely, a CFD, also known as a contract for difference, is a derivative financial product that allows you to trade with the price difference of an asset without having to physically own it. CFDs give you great exposure to the market as they can be used to trade a wide variety of assets, including crude oil price. Moreover, traders can use leverage to magnify their potential profits or loss, even if their starting balance is low.
Of course, CFD trading is not risk-free, as you'd have to risk at least some of your capital to potentially profit from it—and this is magnified in the case of a volatile asset like oil. Still, those who know how to trade CFDs could get potential profit from these price fluctuations.
» Become a more experienced trader: Trading courses for beginners and advanced trading courses Best Platforms—Utilize the power of MetaTrader4 and ProTraderPractice Trading Risk Free—use virtual money on our demo accountExpert Support—Consult with our experienced market experts Important Pre-trading Considerations
Now that we've established why trading crude oil CFDs can be potentially profitable, it's important to take some aspects into consideration before you start trading. Namely, performing detailed research, due diligence, and having a specific strategy go a long way when planning to trade crude oil CFDs. With the right considerations, you may get some potential profit; but there is still risk exposure to the market.
Commodity Choice
When it comes to oil, there are two main types: Brent Crude Oil and WTI Oil. Brent Crude is extracted from the North Sea and used as a benchmark to price two-thirds of the world's internationally traded crude oil supply. The volatility of crude oil is primarily based on geopolitical events happening in Europe, Asia, and Africa, which is where this type of oil is primarily used. For example, after the start of the war in Ukraine, Brent Oil went up 23%.
On the other hand, WTI or West Texas Intermediate is a type of crude oil that's extracted from Texas and used as a benchmark for pricing in the US. The price of WTI is primarily based on US domestic events such as the opening of the Keystone XL oil pipeline. After the war in Ukraine, WTI went up 19%, which shows that there's a correlation in the price between the two commodities, but also that they're never trading at the same price. This price difference is known as the Brent/WTI spread.
Trading Strategy
When you're planning to trade oil CFDs, it's important that you have a clear strategy in place. This includes setting entry and exit points as well as stop-loss and take-profit orders. Your trading strategy should also consider the time frame you plan on holding your position as well as the amount of capital you're willing to risk.
Risk Management Strategy
As with any type of trading, oil CFD trading comes with its own risks that need to be managed. This includes the risk of losses as well as the price fluctuations of the commodity. To mitigate these risks, it's important to have a proper risk management strategy in place. This includes setting stop-loss orders at key levels or possibly including a hedging strategy.
CFD Brokerage
Last but not least, in order to trade oil CFDs, you'll need to find a reputable CFD brokerage. This is a platform that will allow you to trade a variety of assets without having to own them, including commodities like crude oil. When looking for a brokerage, it's important to consider the fees associated with trading as well as the features and tools that are available. If you're a beginner, we highly recommend, that you open an account with a reliable brokerage and trade with a user-friendly platform, like Fortrade.
» Struggling to understand complex trading terms? Take a look at our glossary of terms.
How to Start Trading Crude Oil CFDs
Now that we've gone over the important considerations to take into account before trading oil CFDs, let's go over the steps on how to start trading.
Open an account at a reputable CFD brokerageDownload and install the brokerage's trading platformDeposit the funds you're willing to trade into your accountStart opening and closing trades via the platform
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Conclusion
Even though crude oil has been a historically volatile commodity, CFD trading may become a potentially profitable endeavor if you take the necessary precautions. This includes performing detailed research, diversifying, and always being up-to-date with geopolitical events. With the right considerations in place, you can trade crude oil CFDs successfully and get potential profit even in the most volatile market conditions.
ForexPending Orders in Forex: 4 Types & How They WorkForex is one of the most liquid components of the global financial markets, with traders executing approximately $2 trillion worth of trades daily. In the last couple of years, forex has turned into a popular trading avenue for newcomers, meaning that learning the basic features of FX trading, particularly when it comes to the pending order step of investing, is more important than ever before.
So, what are pending orders, and how many types are there? What Are Pending Orders?
In forex trading, a pending order is the trader's order to buy or sell a currency pair at a later time, when it goes above or below a certain price.
For example, if you are trading the USD/CAD currency pair, and you want to exit your position at a designated price of 1.2899, you will place a sell limit instruction on your order (we will get to that in a moment).
This makes the process more manageable and convenient than sitting in front of your computer and waiting for your price target. Plus, during some trading sessions, you will notice that volatility can be immense or movements can be rather tepid. It all depends on what you are trading and when you are participating in the forex market. The fast and furious ticks can be either helpful or challenging, depending on your circumstances.
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There are four types of pending orders when trading currency pairs. Each type of pending order will carry out a specific function and serve a different purpose, whether you are buying or selling. Pending orders may potentially make your forex trading endeavors more fruitful, especially when you are not looking to trade actively every day.
Here are the four types of pending orders:
1. Buy Limit
A buy limit order consists of buying an asset at or below a specified price. This feature lets traders control the price of the position they enter rather than paying a higher cost at the entry point.
2. Buy Stop
A buy stop order will result in the trader purchasing a pair when it hits a pre-specified price, typically above the current market price.
It might seem like a counterintuitive mechanism (why would you want to buy at a price higher than what the market is showing?), but the aim is to take advantage of an upward movement in the asset's price. In addition, buy stop orders can be utilized to shield against unlimited losses of uncovered short positions.
3. Sell Limit
A sell limit order will involve traders selling your securities at a specific price or higher. This is used for investors who have a target price in mind and want to execute an order that enables the trader to take potential profits or limit losses.
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4. Sell Stop
A sell stop order is another type of pending order to sell at a market price. The one notable difference is that it might result in a shift to the market order, meaning there could be some slippage in the order (the difference in the expected price and the actual price you receive upon the execution of the trade).
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Final Words
Forex is a fast-paced trading environment, whether you are working with major currency pairs (EUR/USD or GBP/JPY) or the exotics (EUR/TRY or USD/NOK). This is why many traders opt to use pending orders, as they can serve a variety of different purposes, from buying to selling.
Instead of waiting for the best prices, you can make the whole process much easier and more efficient with pending orders, as they may help you obtain your desired price targets or limit your losses.
