Energies

Many of you came to LiquidityX as forex traders, but you should know there’s plenty of potential opportunities in energy trading too. The energy markets are some of the most interesting, and exciting markets around. Trading energy involves buying and selling commodities like crude oil, natural gas, heating oil, and gasoline. Because the prices of these commodities can fluctuate heavily they are very attractive for traders and speculators looking for good markets to trade.

We believe trading the largest and most liquid energy markets makes the most sense. These include West Texas Intermediate crude, Brent crude, gasoline, and natural gas. Products like heating oil and various forms of electricity aren’t as liquid, they might be quite erratic, and may require specialized knowledge. Stick with the liquid markets and trade popular energy products.

Popular Energy Contracts

The most popular energy contracts for traders are as follows:

• West Texas Intermediate (WTI) Crude Oil
• Brent Crude Oil
• Gasoline
• Natural Gas

As is the case with most forex traders you probably have experience judging price movements based on the economic data, and energy can also be examined in the same way. One example is the seasonality of the energy markets. As summer approaches in the U.S. we often see gasoline prices rising because summer means vacations and more driving. Winter can also bring seasonality, but in this case to natural gas. Because the northern half of the U.S. experiences very cold winter weather, and uses a significant amount of natural gas for heating, prices can follow the patterns of U.S. winter temperatures.

You will also see geopolitical movements in crude oil. For example, Mid-east tensions can cause a rally in crude. Any conflict or threat to disrupt supplies will spur rising prices. And once the disruption or tension is resolved prices retreat.

It’s also worth noting that crude oil markets are notoriously sensitive to the value of the U.S. dollar. This is because crude is priced in U.S. dollars. So, when the U.S. dollar strengthens it makes crude oil more expensive to countries outside the U.S. who will need to purchase dollars at a higher rate in order to purchase their oil. That can cause a drop-in oil prices. The inverse is also true, where oil prices will often rise when the U.S. dollar is weaker.

Advantages of Energy CFD Trading on LiquidityX

You’ll find many ways to invest in the energy markets including options, futures, ETFs, and energy related equities. You can even buy a real barrel of oil if that’s your thing. Each method comes with its own risks and can range from a direct investment in oil to a hedging strategy or a speculation on price.

Most importantly if you want to speculate on crude oil is that you’ll need a broker account of some sort, and this is where LiquidityX can help. We offer speculation on crude through CFDs, which many of our traders find convenient to use.

Of course, you could find a futures broker to trade crude oil futures, but that can be an expensive proposition. In the U.S. you would be required to have over $5,000 per contract to fulfil the margin requirements of futures trading. That’s for a full lot, and in reality, you’ll want much more because you’ll need a buffer to avoid a margin call if prices initially move against you.

Compare that with the CFD trading offered at LiquidityX where you are able to trade in far smaller amounts than the standard futures contract. This will significantly lower the margin requirements and give you a smaller tick value on each contract as well, which is an advantage to the average investor trading crude oil.

Trading CFDs is a smear idea and since the value of CFDs moves in lockstep with the underlying futures market the difference between the two, other than margin requirements and tick value, is basically negligible and trading CFDs won’t affect performance when compared with futures.

LiquidityX can help with your education of the oil markets and analysis of price trends and fundamental factors. Open an account to experience the excitement of Energy CFD trading.