Crude oil is one of the most sought commodities in the commodity market. While trading in crude oil, traders has to rely on economic indicators and indices to take an investment decision. These economic indicators are the sign that guides the traders as to which position they should take to make the profit in the market. The crude oil traders should take into consideration the global economic outlook to take the advantageous position. Crude oil has a unique standing in the world's economic and political systems; therefore, it offers high liquidity and excellent opportunities to make a profit in almost all the market conditions. The reasons most of the traders failed to take full advantage of crude oil fluctuations is either they are ignorant of the hidden pitfalls that erode earnings or because they fail to understand the unique characteristics of this market.
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Crude oil markets are highly specialized, and in order to earn a consistent profit by trading, a trader needs to have a specific skill set and a good understanding of these factors:
What leads to the movement of the crude oil prices
The historical price movement
Technicals
Correlation of the crude oil and Dollar and Stock Market
Learning how to play on volumes
Crude oil has a strong negative correlation with US Dollar and a strong positive correlation with the Stock market.
A negative correlation means that both the commodity moves in opposite direction. It is observed that strong US Dollar put pressure on crude oil and it falls. Conversely, the lower Dollar value helps and support the surge in oil price.
The crude oil is also positively correlated to the stock market. A growing economy and the positive trend in stock market supports the higher oil prices.
However, a trader needs to be cautious because if oil price moves high, it can slow down the economy. At this point, the stock market and oil price tend to move in the opposite direction.
Crude oil is one of the favourite markets for the day traders and it provide ample opportunities to make consistent profit in the commodity market.
The crude oil market reacts pretty well to the pivot points and also to the support and resistance level.
Traders should never try to trade without stop loss as the commodity tends to make soft runs at any given point in time.
The demand and supply of the commodity is the prime factor that leads to the movement in the commodity market. The movement in the price of the crude oil also gets affected by the global output and the economic prosperity globally.
Oversupply of the commodity and its thin demand urges the traders to sell the commodity and push the crude oil to the lower ground.
Increase in demand with flat production creates the bull market for the crude oil, and it encourages the traders to bid, and there is a positive uptrend in the market.
When the positive elements converge, the powerful uptrend emerges. Similarly, the convergence of the negative elements creates the equally powerful downtrend.
So the traders should be able to judge the market and read the trend before taking positions to make a profit in the market.
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