Oil is a very attractive asset for investors from the point of view of potential profitability; still strict risk management is required here due to the high asset volatility, as well as the product understanding.

There is no pip calculation basis for commodities trading. The Bid & Ask price you see is the price for one barrel of oil.

What needs to be checked before you start trading OIL:

Does the contact have expiry date? If yes, plan accordingly. At the date of expiry the trade will be automatically closed or rollovered with the automatic new contract price adjustment. Check with your Broker first and refer to the Contract Expiration Calendar on a website.

Check the minimal position and the leverage available. At some Brokers the leverage might be just 1:10 so the trading can be affordable with a properly balanced account only.

Learn the risk management calculation.

Let’s take CRUDE OIL (WTI) as the example with 1:10 leverage and the price 80 USD per barrel.

RISK MANAGEMENT CALCULATION:

In this example I will take the case when 1 contract of CRUDE OIL equals 100 barrels but check twice – it might be 1000 barrels at some platforms (reflected in Specification).

0.01 contract position size = 1 barrel

80.00 x 1 barrels/ 10 (your leverage) = 8 usd

It means that it will take 8 usd as the margin requirement from your balance.

Opening 0.01 contract position means that you buy/sell 1 barrel. Price movement just on 1 USD can potentially bring you 1 USD profit as well as the same drawdown.

0.10 contract position size = 10 barrels

80.00 x 10 barrels/ 10 (your leverage) = 80 usd

It means that it will take 80 usd as the margin requirement from your balance.

Opening 0.10 contract position means that you buy/sell 10 barrels. Price movement just on 1 USD can potentially bring you 10 USD profit as well as the same drawdown.

1.0 contract position size = 100 barrels

80.00 x 100 barrels/ 10 (your leverage) = 800 usd

It means that it will take 800 usd as the margin requirement from your balance.

Opening 1.0 contract position means that you buy/sell 100 barrels. Price movement just on 1 USD can potentially bring you 100 USD profit as well as the same drawdown.

NOTE: Do not forget about the Market 3-day swaps that are taken on Fridays. Always check Contract Specification in the Market Watch before the new asset trading.

Where to trade? You know 👉 https://track.pepperstonepartners.com/visit/?bta=38408&brand=pepperstone