If you are considering an investment in crude oil, it’s a fantastic decision. Crude oil provides high liquidity as well as excellent chances of profits in almost any market condition because of its exclusive position within the political and economic systems of the world.

Market participants commonly miss to take the full advantage of crude oil trading signals, either since they haven’t understood the exceptional characteristics of these markets or they don’t know about the hidden pitfalls that can consume their earnings. With the following steps you can profit from these volatile markets.

1. Understand What Moves Crude Oil

You should know that crude oil moves through insights of demand and supply, influenced by worldwide output along with global financial prosperity. Rising demand and reduced or stagnant production make traders to bid crude oil to a higher level, whereas oversupply and decline in demand make traders to sell crude oil markets to a lower level.

2. Choose Between WTI and Brent Crude Oil

Two primary markets control crude oil trade: Western Intermediate or WTI and Brent. WTI comes from the U.S. Permian Basin and some other local sources, whereas Brent originates from over a dozen fields in the North Atlantic. API gravity and sulfur content in these varieties are different and lower WTI levels are commonly known as light sweet crude oil. In recent years, Brent has been a better pointer to world pricing, though WTI is currently more heavily traded in the world futures markets.

A good crude oil trading strategy is to understand that pricing within these grades remained in a narrow band for many years, but the situation ended in 2010 when the two markets had a sharp divergence because of a quickly changing demand vs. supply situation. The growth of U.S. oil production, induced by shale and fracking technology, has elevated the output just at the time when Brent drilling has experienced a sharp reduction.

The divergence has been even aggravated by the U.S. law of the 1970s, prohibiting local oil firms from selling their produce in the foreign markets. There are chances that those laws will change in coming years, but other factors regarding supply could interfere to maintain the division.

3. Study the Long-term Chart

WTI crude oil grew after WWII, reaching to the peak in the upper 20s and getting through a narrow band till the 1970s embargo initiated a parabolic rally to $120. It reached the peak late in the decade and started a twisted decline, plunging into the teens in front of the new millennium. In 1999, crude oil entered a new and strong uptrend, growing to an all-time high at $157.73 in 2008’s June. And then it declined into a huge trading range between that level and the upper 20s, settling at around $55 during the end of 2017.

So, these are a few crude oil trading tips you should know if you want to make a successful entry in this market. Study them and take an informed decision.