crude oil trading strategy

How to Trade Like a Professional Oil Trader – Crude Oil Trading Tips

Today you’re going to learn how to trade like a professional Oil trader by using our Crude Oil trading tips. The Crude Oil market is not just a high liquidity market, but it’s also one of the favorite markets that professional traders like to find opportunities to profit.

Our team at Trading Strategy Guides has developed the Crude oil trading strategies PDF to help you swim with the big sharks. It’s no secret that the Crude Oil market is dominated by the commercial players and the big hedge funds.

The commercial players, like the big Oil producers, use the Crude Oil futures market to hedge physical exposure from possible big market swings. On the other hand, the big hedge funds, speculate on the short-term Oil price direction.

When you try to trade such overcrowded market, you need your Crude Oil strategy to perform at a high level if you want to survive trading Oil. The smart money uses computers and high-frequency trading that can execute multiple trades per second.

Moving forward, we’ll go through some significant aspects that a good Crude Oil strategy needs to incorporate and share some Crude Oil trading tips. Also, read trading discipline which is also a most important skill for successful trading.

Crude Oil Trading Tips

The first oil trading tip is that unlike many other markets if you want to have a better reading of the Oil price action, you also need to be interested in the fundamental side. The Oil supply and demand balances are a critical factor that can alter and change the Oil trend.

In this regard keeping an eye on the Oil output forecast and consumption outlook can give you an extra edge.

The Oil market is also very sensitive to the geopolitical risks.

Everything that happens in Iran or anything that happens in terms of weather in the Gulf of Mexico will adversely affect the Oil supply output.

Another trading tip we can reveal and share with you is that the Oil price is very sensitive to the seasonal pattern. If you get into the seasonal flow of trading Oil, it can be quite rewarding.

crude oil trading tips

The Crude Oil price has the tendency to rise in August due to the summer driving season, but it tends to fall towards mid-September and October.

In the category of another crude oil trading tips, we can mention that the US dollar will also affect crude oil prices. The strength of the dollar is a quick way to gauge the strength of Crude Oil prices.

As a general rule, crude oil prices tend to drop when the US dollar appreciates. Conversely, when the dollar is weaker, crude oil prices tend to strengthen.

crude oil strategy

If history can be used as a barometer to forecast Crude Oil prices, we can say the US dollar and Oil had an interesting and perhaps surprising relationship as they tend to move in opposed directions.

Now, here is the best way to conquer the market using this Crude Oil trading strategy PDF:

Crude Oil Trading Strategy PDF

Let’s now look into what it takes to develop a consistently reliable Crude Oil strategy. We have decided to share some crude oil trading tips that have stood the test of time, and that can help you trade like a professional oil trader.

Before we go any further, we always recommend taking a piece of paper and a pen and note down the rules of this entry method.

For this article, we’re going to look at the buy side.

Now, we are going to share our personal step-by-step guide

Step #1: Attach the Stochastic RSI indicator and the CCI indicator over the Crude Oil chart

There are many technical indicators you can choose from, and picking the right one is important if you want to make good trades. The best crude oil day trading indicator is the Stochastic RSI indicator. At least that’s what we found out after trading for many years the Oil market.

Note*: the preferred Stochastic RSI settings is 20-periods.

Crude oil trading strategies PDF

The second technical indicator we’re going to use to spot cycles in the commodity market is the CCI indicator.

The CCI indicator was really designed to find cyclical trends in the Oil market and to be used as a bearish or bullish filter.

Note: The preferred CCI settings are 200-periods.

Technically, the way to interpret the Commodity Channel indicator is that a positive reading above the zero line is a bullish signal and a start of an uptrend, while a negative reading below the zero line is a bearish signal.

Step #2: Wait until the Stochastic RSI indicator shows an overbought reading for a prolonged period of time

A good crude oil strategy only looks to buy in strong up days. And contrary to the popular believe when a market shows overbought reading for a prolonged period of time that’s a strong bullish signal.

As the saying goes, a market can stay in overbought and oversold territory longer than you can remain solvent.

crude oil trading techniques

The Oil prices are very dynamic and that’s the reason why we don’t want to constrain how much time it needs to stay in overbought territory for a valid trading signal.

However, as a general rule, the Stochastic RSI indicator needs to not drop below the 50 line during this time. Preferably, we want to see strong readings in the region of the 80 level.

We’re still not ready to pull the trigger as there are still two more trading conditions that need to be satisfied.

See below:

Step #3: Stochastic RSI indicator needs to drop in oversold territory, and the CCI indicator needs to show a reading above the 0 line (preferably above the +100 line)

Now that we know that a prolonged overbought reading means the smart money buying power, we can assume that once the Oil market reaches oversold reading the smart money will show up again to keep Oil prices up.

To guard ourselves against the possibility of a false signal we added the CCI indicator to confirm Crude Oil cycle.

In this regard, during the time the Stochastic RSI resets, we need to see the CCI holding above the 0 line; preferably we want the CCI indicator to hold above the +100 line. A CCI reading above the +100 level will ensure a higher probability of the trade to succeed.

crude oil trading tips

Now that Crude Oil price is satisfying these new technical requirements, we can lay down a simple entry strategy to buy Crude Oil.

See below:

Step #4:  Buy at the market once the Fast Moving Average (Stochastic RSI) crosses below the 20 level.

This Crude Oil entry strategy is easy to implement.

We only need the fast moving average of the Stochastic RSI indicator to cross below the 20 level. Usually, the blue line is the fast moving average. You can easily identify the fast moving average because it’s the one moving average that it’s in front.

This is a quick trade that enables all traders that took that trade to walk away from the trading screens for the rest of the day.

investing crude oil

This brings us to the next important thing that we need to establish for the best Crude oil trading strategies PDF, which is where to place our protective stop loss.

See below:

Step #5: Hide your protective Stop Loss below the swing low that corresponds with the previous time the Stochastic RSI indicator was in oversold territory

Simply identify when was the last time the Stochastic RSI indicator was in oversold territory and then locate the corresponding swing low on the price chart.

Once you’ve identified that point on the Crude Oil chart, use it to place your protective stop loss.

crude oil live chart

Last but not least, we also need to define where we take profits when trading Oil.

See below:

Step #6: Take profit at the end of the day or if the CCI drops below the Zero line

Crude Oil has high volatility and great potential to profit from the intraday trends. Our favorite crude oil exit strategy is to let the trade run until the end of the day or when the CCI indicator drops below the zero line, whichever comes first.

We’re going to incorporate this valuable resource into our exit strategy which is the Commodity Channel Index. The CCI indicator can spot in advance when an Oil cycle has ended or when a new one has started.

crude oil strategy

Note** the above was an example of a BUY trade using our crude oil strategy. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.

Crude oil trading strategies PDF

Conclusion – Crude Oil Strategy

The big trading volume that pours into the Oil market can generate some freakish trading opportunities for the prepared trader. It’s important to have a commodity trading strategy because no crude oil trading tips can substitute the necessary trading skills you need to survive in the commodity market.

The bottom line is that traders can benefit from volatile WTI Crude Oil prices by using our trading tips. However, you need to exercise a great amount of discipline because the Oil market is infested with the big sharks that want your money

Thank you for reading!

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guide to trading crude oil