Crude Oil Futures

                                                                                         

Crude Oil Futures

Sages and fools: the investment world is full of both. For every Warren Buffett in the world that is an incredibly successful trader, there is some Joe Blow who wants to be one. Rarely do the two come together but that meeting seems to have occurred in one strange place: crude oil futures. Even though the price of crude oil has more than doubled since the start of the decade and they continue to move upward, there isn’t a mad rush of investors in crude oil futures. Why is this? The answer to this and the related investment strategy are probably easier to explain than you might think.


A Brief History of Crude Oil Prices

Crude oil futures tend to be wildly volatile, but they have been on an upward trend for a great deal of time. Prices per barrel that were in the $30’s at the start of the decade are now dancing between $70 and $75. Some “experts” have even postulated that the price could soar over $100 a barrel or even more as demand continues to outpace supply. A crude oil futures that were around $64 at the end of 2005 rose to $76 a barrel at the end of 200c. Logic would say that crude oil futures will continue to raise heading into the future and that oil investment is a slam dunk.


The Intricacies of Oil Prices

While logic might point in that direction, nobody is investing their entire fortune in crude oil futures. Why is that? Crude oil futures are extremely volatile and depending on the oil economy to make a fortune could be a deadly mistake. While there has been an overall upward trend, there have been deep troughs in the prices and radical changes, sometimes on a daily or hourly basis. While this kind of price movement can be profitable, it is too risky for most investors, especially in futures trading where large sums of money can be leveraged and invested.

Media-induced volatility is normal when you trade futures. Whether you invest in oil, gold, wheat or corn futures, the prices are one positive article or negative news report away from a dramatic change. Crude oil futures tend to be the most volatile. Prices are tracked on a minute to minute basis and reported in every broadcast. Countries monitor supply and terrorism or wars can completely change the dynamics of their prices. Simply put, oil is an investment business unlike any other.

Why Not Bet It All?

If everyone believes that oil prices will continue their relentless climb upward, why don’t they just bet it all on crude oil futures? The most likely reason is the obvious one. Not everyone in commodity trading has faith in this trend. While futures prices normally are a good refection of the direction current prices will take, crude oil futures can be difficult to read.

The best way to follow crude oil futures and determine their movements is with fundamental analysis. Watching the news and researching the Internet are very helpful but the best source of insight is in your trading system. While it is possible to follow prices with bar charts, it really takes the power of Japanese Candlesticks to track their trends and form solid conclusions. The Japanese Candlestick method includes signals that can help find trends, even in crude oil futures, that bar charts can’t see.-

Conclusion

This is one time that the sages and fools agree. Crude oil futures are difficult to predict. Japanese Candlestick charts can offer the futures trader help with investing that he or she won’t receive from other charting methods. Remember the old saying, “fools rush in where angels fear to tread” and don’t jump into the crude oil futures market without the help of Japanese Candlesticks.

About the author:
http://www.candlestickforum.com/PPF/Parameters/1_21_/candlestick.asp
A site dedicated to stock market investing using Japanese Candlesticks


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