Oil’s (The Black Gold) Market Trend Before and After
Black gold: The twentieth and twenty-first centuries have seen people die, kill, and lie to possess this commodity. While it has been the back of modernizing society, for the most part it has successfully helped ruin our environment and our intercontinental relationships. In spite of all that, one good thing definitely comes from the discovery of oil—the end of the killing of whales for their fat.
Before
Oil portends the potential for the market to explode upward. This would be one of the few times that using just a stop loss may be appropriate Or you could use an option as a hedge, or use this setup to sell puts and collect the premium. If your account can't handle the high margins that oil requires, then you could create a synthetic futures position of two options with a third option for protection.
After
According to the money management rules in Winning the Trading Game you would need $30,000 to trade one oil contract. There is always the possibility of trading the mini-oil contract, but it lacks a little of the same impact. When faced with a margin or capital intensive market like this and the trade setup looks just right, consider the ways you can reduce your margin expense. Whether you use a crack spread or put on a calendar spread to take advantage of contango or backwardation . Do not give up on figuring out an inexpensive way to participate in the trade.
Conclusion
By analyzing charts, whether in a paper format like this or in an online demo account, you have the ability to test your ideas and theories in depth. They say that practice makes perfect, but it is perfect practice that makes perfect. As long as you properly apply the principles and ideas you have learned in your practice trading, then your actual trading will become more effective. This puts you leaps and bounds ahead of the majority of retail traders and that much closer to becoming a professional trader.
