1. Never put in all capital
A smart trader never put in all his capital into oil trading as its volatility can never be expected. It can jump up 3% but down 3% in just few minutes. Always prepare your bullets so that you can buy in more if the price continues to drop.
2. Learn about the indicators
There are a few reports mostly weekly that will impact the oil price enormously. Learn about it and know when they are out since volatility is expected just before and after the reports. You may want to set buy or sell orders few pips from the current price just before the report is out. I have shared a few crucial reports that worth a read such as US Crude Oil Inventories
and US Baker Hughes Oil Rig Counts
3. Use low leverage
Use low leverage can avoid loss more than you have invested. If you are using high leverage, you may need to extend your stop loss by putting in more capital to avoid closing of your trade when the price drop suddenly or temporarily.
4. Know when to leave
Set your own rules for yourself, setting your own ‘stop loss’ and ‘take profit’. Leaving at the right timing doesn’t mean that you must leave with profits, leaving with smaller loss can be a smart choice as well. In opposite, don’t get too excited with unrealized profits, remember that the profits are never realized unless you close your trades as sometimes greedy can be the culprit of losing what you should have owned.
5. Don’t be emotional
Don’t get influenced by your emotion or others’ emotion especially if you are trading on a social trading platform. Know what you are doing and do with your own rules. A lot of people will immediately close their buying positions when they see a sudden drop and start to sell, but it turns out that the price goes up again after a sudden dip. It is so unpredictable but never get emotionally affected.
6. Update yourself with the latest news
Read more unless you just wish to gamble. Know more about the latest news affecting oil supply and demand are pivotal as oil price is always balanced by supply and demand. Any disruption of the balance can cause a huge fluctuation in the price.
7. Do your own justification
Do not merely follow the others’ opinions including me. Do the researches yourself as well because you are investing your own money. If you have limited time, avoid oil trading since it requires management from time to time.
8. Use short-selling tactic
Learn to use short-selling tactic while holding buying positions to minimize your loss and earn from the temporary corrections / fluctuations. I have written a post regarding how to benefit from short-selling tactic in oil trading, check out the post “MUST READ” Tips in Oil Trading — Short Selling
What is your strategies in oil trading? Comment below if you would like to share yours.