If you are impressed by the type of profits that your friends, relatives, colleagues or other people have earned through commodity futures trading and also want to take the plunge, then there are many crucial things that you need to know before taking the dive. You will need the services of a brokerage firm to commence trading as the firm is the link between the seller and the potential buyer. The type of futures that you would like to trade on also has to be given due importance. The type of trades that you like to execute must also be known beforehand so that you do not face any hassles when you start. Let us take a look at these points in detail now.
Choosing the right brokerage firm
Before you choose the best oil trading company and start to invest, you will need to first decide on a good brokerage firm. You need to pick a full-fledged broker so that you get timely advice and better level of service. There is no doubt that the fees charged for full service will be higher. If you cannot afford a full broker, then you can choose a discount broker. But, you will have to do a lot of things yourself if you opt for discount brokers. His fees and commissions will be on the lower side. It is very important for you to carry out a deep research and consider the following when choosing a brokerage firm.
• Commission rates
• Kind of trades handles
• Customer service
• Software used and monitoring of the user interface
• Margin needs
Future market categories
The main categories of futures markets include: energy (heating oil, natural gas, crude oil, coal); metals (gold, silver, base metals, platinum); agriculture (grains, dairy, forest, livestock); Forex (Euros/$, Yen/$, GBP/$) and equity indexes. You have the option to trade in any one or in as many categories as you like. If you are a beginner, but have knowledge about stocks, it is better to start futures trades with equity indexes. This way you will get to know the movements in the market and also learn something about futures markets as well. Once you have chosen the category, it is time to pick up the instruments to trade on. If you opt for oil business commodities, then you will have to freeze on which instruments like crude oil or natural gas or coal.
Types of trades
To start with, you can buy or sell a futures contract depending on when the price will fall or rise. They are similar to stock market trades. Once you get a hang of things, you will have to use more modern techniques to trade and earn big. The common types of trades are: spread and basis trades. Research about this on the internet or get help from your broker to enhance your skills.