Sophisticated Financing And Oil Commodity Futures
The ownership of the oil sector has now allowed individual to own and trade oil futures and shares in leading markets world wide. Extended Transfer Funds or EFTs have been most influential in helping investors make the most of the international oil market without having to necessarily incur transport costs and storage expenses. The idea of using EFTs is based on developing the capacity of individuals to invest in the energy sector that has often been seen as a complex arena that is best left for the rich and the mighty. In the United States for example a share is equivalent to the price of one barrel. Assuming that oil prices rise by 5%, you can sum up your returns to 5% per share. However before trading oil futures by using ETFs you need to keep in mind some factors
How much you are willing to invest
Trading in the energy sector and particularly oil is capital intensive and requires substantive capital. The more you invest the higher the chances of making good money and also huge loss but all together what should be your guiding factor is the predicted trend in oil prices. Whilst acknowledging that oil futures can be affected by quite a number of factors, you should structure your trading strategy accordingly. In other words what you need to do is to make sure that in case you even loose some money in the investment the blow will not that hard.
The energy company that you will choose
ETFs are meant to help buy shares in an oil trading companies with the hope that the value of the shares will rise and you will get the profit. Now considering that you are buying the shares from an energy trading company you need to make a choice which of the available options you will take. The current market has a lot of diversity of privately and state owned oil trading companies and the one you chose should be inspired by the convenience and flexibility of trading they will offer you. Oil prices are relatively standard and the issue of the best offer does not really count. All the same you may also want to be involved in a legitimate trade and therefore you need to choose wisely your company.
What is your long term strategy?
When you have chosen ETFs on oil trading you will have to put your long terms strategy in the trade in question. In other words you actually need to know where you want this investment to take you in the future or better still by when you expect to have gained set measurable profits. In this regard also, you need to establish how much money you are willing to loose should the markets go negative and how you exit when such situation occur. Every investment must have a second plan in case the first one fails to work and this are some of things that are specific to trading commodities and particularly oil on ETFs.
Michael Hastings writes interesting articles about gold trading. He works as an editor at HowToTradeCommodities.com. Click here to learn more.