The most common group of commodities that fall into the basket of Energy are WTI Crude, Brent Crude and Natural Gas. When you tune into your favorite financial markets site or channel, it’s these 3 commodities that analysts are generally speaking about.
The volatility of the energy market is indeed attractive to new investors but be warned that trading energy is often a rollercoaster of ups and downs as this market sector is not only the most unpredictable but most volatile. For example, who would have thought in their lifetimes that we’d see the price of oil trading at a negative?
Why Trade Energy?
Volatility – Traders who wish to live on the edge will find their fix trading the energy markets. Don’t let the ease in seeing quick profits lure you into believing it’s that easy, as trading energy is not for the faint of heart.
Long Term Trends Within Volatility – If you can capture the pulse of the market, it’s possible to ride out a long trends in the energy market. Despite the volatility, there is a method to the madness as energy prices tend to follow, long term trends. To better capture those, though, one should trade on limited leverage or reduce position sizing.
The Politics Play – Energy prices are very sensitive to global politics and historically are known to rise along with tensions in the Middle East. In addition, energy tends to track well with inflation as rising prices amongst goods as a whole. Why? Energy is the backbone to all parts of life, from turning on the lights, commuting to work, going on vacation, etc.
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