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How to Buy & Sell Oil Futures

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Trade oil futures through a CFTC registered broker.

Energy futures products, including crude oil, trade on the NYMEX commodities exchange. Oil futures trading allows investors to profit from the changes in the price of crude oil. Futures trading gives traders equal opportunity to determine whether they think the price of crude will increase or decrease.

Instructions

    • 1

      Apply for and open an account with a commodity broker registered with the Commodities Futures Trading Commission (CFTC). Brokers and their representatives for futures trading must be registered with the CFTC. These brokers usually are not stock brokers but specialize in commodities and futures trading.

    • 2

      Download and install trading software from the futures brokers. The broker you select will have a couple of software options. A broker's representative can help you pick the most appropriate software for oil futures trading. Futures brokers typically provide more over-the-phone guidance on setting up and trading than the online stock brokers.

    • 3

      Practice trading oil futures in a simulated money account. The futures broker should set up a simulated account on your software for practice trading. Use the practice to learn about the software and to practice trading strategies.

    • 4

      Start live trading oil futures. If you think the price of oil will go up, you buy to open one or more futures contract. To profit from falling prices you sell to open. Entering the opposite trade, sell or buy, closes out the position. Future contracts require a set margin deposit. The margin deposit for a Light Sweet Crude futures contract is $5,000. Each contract is for 1,000 barrels of oil.

Tips & Warnings

  • Practice trading oil futures in a simulated account until you are consistently profitable. No reason to lose real money to learn trading.

  • There is a wide range of oil futures contracts traded on the NYMEX. Check with your broker to find the most liquid and active contracts.

  • The CFTC warns that futures traders are subject to large losses when trading. New traders should start with money they can afford to lose.

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References

  • Photo Credit oil well image by michael langley from Fotolia.com

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