How does oil trading work?
When you trade oil with AxiTrader, you’re not buying any physical oil. Instead, you’re simply trading on the realtime price movements of the commodity. This type of trade is known as a Contract For Difference, or CFD.
Example 1: Profiting from a price increase
Let’s say you buy an oil contract at a current market price of US$31.48 per barrel, believing the market price will rise by a certain time. If the price of the oil has risen at the expiry of the contract, you’ll make a profit based on the difference between the buy and sell price. However, if it falls below the buy price at the point when the contract expires, you’ll lose the trade.
However, if it falls below the buy price at the point when the contract expires, you’ll lose the trade.
Example 2: Profiting from a price decrease
Let’s again say you want to buy an oil contract at US$31.48 a barrel, but this time believed the price will fall. If it fell by the time of the contract expiry, you’d make a profit. If it had risen, you’d incur a loss.
Profiting from downward price movements is one of the unique aspects of CFD trading; if you were purchasing physical barrels of oil you could only profit by selling the oil for more than you paid for it.
Trading oil as a CFD with AxiTrader means you’re able to take advantage of leverage. This means you can use a small amount of capital to gain full exposure to a trade. It’s important to understand that while applying leverage offers the potential for larger profits from a smaller outlay, it can also increase risk and lead to larger losses, sometimes greater that the margin in your account.
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