Ask Barry: “How Should I Trade Crude Oil?

3
997

Here’s another question from the “Ask Barry” service.

If you don’t already know, this is a service where anyone can ask me a question about the market, technical analysis, trading, money management, etc.

You can use the form in the right column of this blog (scroll down a bit to find it). I personally answer all questions.

Today’s question:

“How do you trade a volatile market like Crude Oil?”

Crude OilGood question. But tough to answer for 2 reasons:

  1. This question is too broad for such a vehicle such as “Ask Barry.” At the risk of sounding too promotional, I have a specific methodology I use for trading everything, and that would include Crude Oil. So to fully answer the question I’d have to teach you my whole method, which takes 6 videos in my Foundations Course #1.
  2. You didn’t mention the time frame you want to trade it – swing trading or day trading.

So I’ll use this opportunity to bring up another very important point. You talk about Crude Oil being a “volatile” market. I’d be curious to understand why you identify it as such.

Perhaps you’re day trading it.

Crude Oil may have a “reputation” for being volatile, but be vary leery of reputations in the market! Markets change, and just when everyone agrees that any given market has a certain characteristic … it changes.

Therefore never accept a label for any market based on what you hear experts saying on TV, or teachers telling you (including me) or you read in a paper, newsletter or magazine.

The only measure of a market’s characteristic must be an OBJECTIVELY MEASURED one, not anyone’s opinion.

Above is a daily chart of Crude Oil. How do we know if it is a volatile market?

Simple.

We add the volatility indicator to the chart. That gives an objective measurement.

As you can see, volatility is down tremendously on a relative basis. Therefore right now (and the markets continually change), Crude Oil is not a volatile market at all (on a daily chart).

Another example:

Several years ago I had been trading the Euro to the long side. I told many friends in my trading club about the amazing trend in the Euro that lasted for years and years. But others didn’t want to trade it. They stayed with the ES.

Then in December of 2004 several of them said they finally decided to get in on this never-ending up trend in the Euro.

Too late!

By the time the reputation of the Euro as a trending market finally caught on with everyone … the trend ended of course!

Sorry, but here’s the no-hype truth:

  • There are no “simple” answers to trading.
  • To make money trading requires learning a complete trading methodology from a professional.
  • Even after learning a valid trading method, you will still need to go through the school of “hard knocks” to learn from the mistakes of your own experience.
  • All of this takes a lot of time and money.
  • Therefore you better love trading!

That may sound quite daunting, and that’s because I want it to. It won’t sell many trading courses, but I’d rather you knew the truth before you decided if you’re willing to pay the real price of becoming a professional trader.

But there is good news:

If you have the financial and psychological ability to make it through the very steep learning curve, and you come out the other side … then the financial rewards can be staggering!

3 COMMENTS

  1. How great has this crude market been? I have been using the DUG to short crude for 2 months. Today I started trading in and out of the DXO every time the DUG gets overbought. I am barely looking at individual stocks right now. Just enough to add to my Roth IRA.

    Great post!

  2. Hi barry

    I forgot to ask also what are days flatuations of price range for oil traders? If we do not closed the trade. DO we really get deliverd with the acutal CRUDE oil itself?

Write Your Comments Here: