It can not only be traded in the futures market and with CFDs contract for difference but with binary options as well. The share of crude oil in the entire global production volume of commodities is nearly 45 percent. This makes crude oil the most important commodity by far. There are a couple of dozens varieties which are distinguished by the deposit location, the weight and the viscosity.

WTI West Texas Intermediary is produced in Midland, Texas, and is the most popular futures contract in the US. Crude oil is a limited resource and it is getting more and more difficult to exploit new oil fields. The supply gets shorter but the demand rises continually.

The increasing living standards and the economic growth in countries like China or India creates a rising demand. This has a huge impact on the future development of the oil price. Binary options are perfect to trade oil. Most binary options traders fall into one of two camps when it comes to trading oil contracts. The first camp is made up of folks who are hesitant to dip their toes in the water.

Some of them realize they lack the expertise of professional traders, and thus are likely to make costly mistakes. Other folks in this camp are intimidated by the volatile nature of crude oil prices.

So, they sit on the sidelines. The second camp is filled with folks who are very comfortable trading oil binary options. They either have a lot of experience with the asset, or have educated themselves on how to trade it profitably. The traders who develop their own trading strategies and stick to them are usually the ones who generate the best returns over time.

Developing your own trading strategy sound enticing? Learn more here. The fact is, with a little education and a bit of experience under your belt, you can learn to trade this asset profitably.

As you know, binary options are contracts on the prices of underlying assets, such as stocks, gold, or oil. There are only two possible outcomes for each contract. The trader must predict which outcome will occur. Each binary option has a predefined rate of return the trader will receive if the contract expires in the money. Everything is known upfront. Now, consider oil crude oil, specifically.

It is a physical asset to which a price is attached. And like other commodities, it is traded vigorously throughout the day with several factors buffeting its price. But trading oil with binary options is much simpler. The supply of oil is driven by two groups of producers: countries that are part of OPEC Organization of the Petroleum Exporting Countries and countries that are not.

The former group controls approximately 40 percent of the supply and actively changes production according to demand. The latter group controls 60 percent of the supply and usually works at full capacity. As a general rule, the higher the production, the lower the price of crude. Demand is also driven by two groups: countries that are part of OECD Organization of Economic Cooperation and Development and those that are not.

The latter group consumes the rest. Greater demand tends to push prices higher, and the growth in demand from a country is usually a result of economic growth. Another factor that affects crude oil prices — both current prices and future prices — is inventory. If inventories dwindle and the market signals an increase in future consumption, you can expect the price of crude to rise.

The opposite scenario — large inventories and dwindling future demand — leads to a price decline. Trading activity in the oil futures market also influences crude oil prices.

This article is sponsored by OptionBit which is our recommended broker for trading oil with binary options. It is true that this is a binary options trading blog, but the truth is that the principles we shall talk about cover all assets traded in the binary options market. So we will select an instrument that is traded on the binary options platforms of many brokers to illustrate a typical trade strategy, and that asset is crude oil.

Many traders are familiar with trading currencies, but very few trade crude oil. As such, they are in a position where they are leaving a lot of money on the table. This is supported by the fact that the same technical analysis principles used in forex analysis are virtually the same principles used in technical analysis of any other instrument.

What is good for the goose definitely has to be good for the gander as well. Let us examin a binary options trading strategy that will employ the use of the Fibonacci retracement tool, this time not as a strict retracement tool but as a tool that can be used for range trading.

Look at this daily chart for crude oil CLJ1. This kind of trade is a dicey one, because the fundamentals that were pushing crude prices were ones that could not be predicted.

This was a war situation. Any shift in the dynamics of the war would immediately cause a shift in the behaviour of the underlying asset. This was what was playing out here. Prices were rising as no one knew how long the war would last. As battles for the Libyan cities raged and towns were taken, lost and re-taken by the opposing fighters, prices were doing a dance. In this sort of scenario, it is extremely important to pay attention not just to the fundamentals, but to the technicals as well.

You may have heard the saying: trigger fundamentally, enter technically. What this saying means is that the triggers for direction are the fundamentals the news , while technical plays enable the trader to make the correct entry in the direction of the fundamental trigger. As it became obvious that the war was going to last for sometime as talks and mediatory efforts broke down, traders settled in for a long ride upwards.

But this is where the technicals came to play. In the chart below, we see a double bottom forming at the commencement of the civil war, giving crude a bullish jumpstart. Combining the news and the double bottom formation, a discerning trader would know that the only way crude oil was going was northwards. This sets up the following binary option plays:. For those who missed the play on scenario 1, the next play would be to wait for the retracement that would surely occur as traders took profits.

Plotting the Fibonacci retracement tool from the swing low to swing high, we see this at the Of the two green circles, the second one is the most significant. This is because the first indicates the point of maximum retracement, which forms a key support.

It tells the trader that any other retracements would probably test that support level as well. This sets up the following trades:. The other binary trade types would be too risky to trade in this situation so we leave them out.

Hope this short strategy lesson is well understood. We used this for crude. You can use it for any asset in the binary options market.

Trading Oil on Binary Options Platforms This article is sponsored by OptionBit which is our recommended broker for trading oil with binary options. Scenario 1 In the chart below, we see a double bottom forming at the commencement of the civil war, giving crude a bullish jumpstart. Scenario 2 For those who missed the play on scenario 1, the next play would be to wait for the retracement that would surely occur as traders took profits.

This sets up the following trades: 1 Touch trade, setting the

When the trade direction has been ascertained, the next step is to head over to the binary options platform and select the appropriate trade type. More About Adam Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more. Essential cookies enable basic functions and are necessary for the proper function of the website. com to get the market pulse on crude oil. You may have heard the saying: trigger fundamentally, enter technically. Trading Crude Oil as a Binary Options Asset 04 Mar, by Chad Simmons. Crude oils popularity in trading stems from its fundamental role in modern life.

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