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Spread Betting and the Crude Oil Markets
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Not so long ago crude oil looked like it was on an unstoppable march back to the $100 barrel level. The price of a barrel of crude had not been that high since September 2008.
At the moment though, in the middle of 2010, we find ourselves slap bang in the centre of the price range we have been trading for the last seven months. $100 seems a long way away.
Looking at the charts there is good price support around the $74.00/74.50 area. Although as Simon Denham of Financial Spreads commented, “Unfortunately, the 12 and 15 month bull trend lines have been broken. If we stay below $78.50 per barrel for too long the pressure for a bigger downward shift may begin to grow.
“Oil seems to have detached itself from the movements of other commodities like gold. The fears of Europe’s sovereign debt problems are supporting high gold prices but taking their toll on oil prices”.
If you are looking to trade the commodities markets then you need to be careful. The simple truth is that if you speculate on the markets you are likely to lose some trades. Whichever form of investment you use, whether you speculate on stocks, trade CFDs or start spread betting you can lose money.
So where can you go if you are looking to trade the financial markets? What if you are only willing to risk part of your funds, but certainly not the bank? In Europe many investors are turning to financial spread betting. As just mentioned, there are downsides to all forms of investing and with spread betting you need to be especially careful because you can lose more than your original stake.
And as the warnings tell you, ‘spread betting carries a high level of risk. Before you trade, ensure that spread betting matches your investment objectives. Familiarise yourself with the risks. Where necessary, seek independent advice’.
Wise words indeed but spread betting does lend itself to trading the oil markets. A key advantage is that spread betting companies offer a wide range of markets that you can speculate on including foreign exchange, indices and equities markets. Naturally you can trade both crude oil and gold.
Also in contrast with more traditional share trading, can take short positions on a market. Financial spread betting offers you the option of trading in either direction. Accordingly, if you think that the price of a barrel of oil will rise, you can speculate on it to rise. Should you believe that the price of crude is going to fall then you can short the market, ie you can speculate on it to fall.
Like most investors you will want to keep your costs low and your profits high. If you are day trading stocks and shares then you will normally incur broker’s fees or similar commissions. With spread betting on crude oil, your trades do not incur any such fees.
Importantly note that spread betting is not subject to tax*. You do not buy or sell any actual resources, shares or assets. Instead you are merely speculating on the future price of your chosen market.
You could be thinking to yourself, this sounds good but where’s the catch? Well, as we discussed above, there are risks. Always be careful when trading the markets.
Spread Betting on Crude Oil Markets - Energies Spreads Comparison
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Energies spread betting markets may also be available through other companies. Notes.
Spread Trading on Commodities
There are a number of regulated companies that offer thousands of international markets such as Crude Oil, Gold, Forex and Stocks. With spread betting companies like CMC Markets and FinancialSpreads.com there are no broker’s fees, no commissions and you can trade a wide range of markets outside normal market hours.
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Financial Spreads - tax free* trading on over 2,500 spread betting markets. With a Financial Spreads Account you can trade commission free, 24 hours a day on stock market indices, forex, shares commodities and...read review » Financial Spreads.
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With financial spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital. Please familiarise yourself with the risks that are involved and before trading, ensure that financial spread betting matches your investment objectives. Seek independent advice where necessary.
Spread Betting and the Crude Oil Markets - edited by D. Jones, 21 May 2010.
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With spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital so please familiarise yourself with the risks that are involved and, before trading, ensure that spread betting matches your investment objectives. Seek independent advice where necessary.
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* Based on current UK tax law. Tax law may change and can differ depending on your personal circumstances.
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