Oil prices have started to steady themselves after a four day plunge. Brent prices are just starting to rebound off of a six month low, and crude oil went up by about 1 percent on Tuesday. A 1 percent rise is great for those going long, but it hasn’t come close to recovering the drop in the price of futures, where the price drop by over 6 percent in less than a week. Some analysts that are heavy in crude have indicated that they are looking to sell their contracts when strength is shown, so there’s a chance that if oil does go up for another day or two, that a big sell off will be triggered, and that will drive down the price once again. If you are trading oil in any way, this is something to keep an eye out for.
What’s going to happen to oil in the foreseeable future? That’s tough to say, but the very long term outlook says that oil will go up. That could take years, and unless you are willing to buy a crude oil future and wait for that amount of time, there’s no easy way to take advantage of this. Short term trading is tough on crude, but it is possible. You can turn over futures contracts through various commodity brokers, but this can be costly as transferring these has a high upfront cost. There is an alternative with binary options, which reduces the cost greatly as you only pay for these when you are incorrect in your prediction on direction. Other than this, trading oil can be difficult, but at least there are two methods to help you create more wealth.
A final alternative is to focus on assets that use oil to their benefit. The general consensus here, though, is that many publicly traded companies that rely on oil are in trouble right now. Some are even at risk of bankruptcy. Day trading these companies can be difficult unless you have a brokerage account that allows you to sell them short. Margin is required here, so only the bigger trading accounts will have access to this.
Crude is currently at just under $48 per barrel, although it was up to $62 not long ago. That’s a big difference, and according to technical analysis, there’s still quite a bit of room for it to drop. Some experts think it could go another $15 lower, in fact. That’s good evidence for going short on oil, especially if you are looking at binary options. The issue here is that the market moves too slowly here for the fast paced trading that most are used to with this type of trading. If you choose to use binaries here, going out several hours or longer is the smarter choice. Remember that technical analysis is great for this current situation, but if there are news events that develop that could override a fall, there’s not much to prevent prices from rising. That’s another benefit of going with binaries as the expiration dates are usually much shorter than if you were to go with a futures contract. While you may experience occasional losses with this strategy, you are able to maneuver with your money more effectively as it will not be tied up in a trade for long. This is both a plus and a minus, but it does provide you with a larger amount of freedom going forward.
If oil does drop significantly again, the well is also primed for some serious long trades. Oil will go up in price eventually, it’s just a matter of waiting for a bottom if you intend to go long. The problem is that there’s so much uncertainty about when this will occur that this is not the best strategy for most.