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Coach's Playbook Posted by Team Topstep June 23, 2021

How to Trade Crude Oil Futures

Day Trading Crude Oil Futures

In one form or another, almost everyone has some interaction with crude oil in their daily lives. Whether it be through transportation, electricity, heating, or even the use of some plastics, products made with crude oil are everywhere. With the popularity of the oil markets on the rise, the Topstep coaches are here with some information on how to trade crude oil futures. 

Funded Trader Shoutout

Even though we’re talking about crude oil today, we can’t pass up an opportunity to shower praise on our brave E-Mini Nasdaq-100 futures traders. And so, today’s coveted funded trader shoutout goes to Stephen M., who rolled with the punches trading a sideways market to add $2,500 in profits to his Funded Account!

Crude Oil Trading Basics

In the U.S., we produce what’s known as West Texas Intermediate (WTI) crude oil. WTI is extracted throughout North America and is shipped to storage facilities around the country until it’s purchased and transported to a refinery.

In the futures markets, a single crude oil contract represents 1,000 barrels of oil. Crude oil is a deliverable commodity with a monthly contract expiration date. As such, it’s important to be aware of expiration dates to avoid having to take delivery of the physical commodity. It’s rare, but it does happen. And, NO, if a mistake does happen and you’re forced to take delivery on a contract of crude, 1,000 barrels of oil WILL NOT be dropped on your front lawn. It remains at a storage facility, and you will be stuck paying storage fees until you’re able to unload it.


What Makes It Move?

Supply and demand are the single most important factors affecting the price of crude oil. For example, if supply decreases and demand increases, it is assumed that the cost of crude oil will rise. Inversely, if supply increases and demand decreases, you should expect prices to fall. 

If you remember, early on in the COVID19 pandemic, when demand for crude oil dropped to historic lows, prices went negative for the first time. Then, as economies began to open back up, oil demand slowly began to rise, and a new 14-month bull run ensued.

For more information on other factors that affect price discovery in the crude oil market, watch this video from a former Topstep funded trader who works in the oil and gas industry.

Make no mistake, volume is picking up, and interest is growing—this a great time to be trading crude futures. 

Trade Well!