Learn Oil Trading Trend Following Strategies
A trader must come up with a oil strategy which they stick to when trading the online crude oil market. A trader must have the discipline to follow the rules of their oil strategy at all times. That's why it's best to come up with trading strategies that are profitable - profitable oil trading systems will be much easier to follow & stick to. This is because a trader knows that by following the rules of their trading system they will be successful.
A carefully designed strategy that has been back tested & proven to produce profitable results is one of the keys to becoming successful when trading the crude oil market. This type of strategy will make it easier for the trader to follow the rules of their oil strategy because they already know that the strategy is profitable, therefore maintaining the discipline to continue following the oil system will be much easier.
Successful oil trade strategies will also include:
1. Oil money management guidelines
2.Oil Trading Psychology Mindset
These 2 will greatly improve the success of any crude oil trading system.
However, Let us look at crude oil price action strategy before explaining more about oil money management & oil trading psychology.
Oil Trading Trend Following Strategies
Oil Trading Trend following strategies are based on first of all determining the overall market trend, whether the crude oil market is moving upwards or it is moving downwards. After determining the crude oil market oil trend the trader will then only open trades in one direction.
Upward oil trend - in an upward oil trend oil prices keep moving up, and here the trader will keep opening buy crude oil trades.
Downward oil trend - in a downward oil trend oil prices keep moving down, and here the trader will keep opening sell crude oil trades.
There are various strategies of determining the crude oil market trends and the two most popular ones are:
Oil Trading Trend lines - traders will draw oil trend line on the crude oil price chart to determine the current general market movement. Once the oil trend direction is determine a trader will then open crude oil trades once the crude oil price touches the oil trend line or when crude oil price is close to the oil trend line. The trader will only open trades in the direction of the trend.
When markets form trends, the oil trend will have a lot of momentum and this momentum will mean that the oil prices will keep moving in that direction for a period of time that lasts for quite some time.
Trading the oil trend is one of the most profitable way to trade the crude oil market if a trader catches a oil trend that has already formed they can make a lot profit just by trading in the direction of the oil trend and the longer the oil trend stays the longer a trader can continue to make profits. Some major oil trend may last for years & these can prove to be the most profitable setups especially when they last for years.
Moving Averages Strategies - Another oil trend identification strategy is the use of the 20 day moving average, and when oil prices are above this moving average the crude oil market is bullish and if oil prices are below this moving average the crude oil market is bearish.
The 50 day moving average is also used for determining the medium term oil trend, while the 200 day moving average is used to determine the long term oil trend of the oil market.
Traders can also use 2 moving averages to form the moving average cross over technique, this technique will have a shorter period moving average & a longer term moving average & these 2 will be use to determine the current market trend. For examples a trader can use the 5 day & 7 day moving averages, and for this strategy the oil trend is upwards if both these moving averages are heading in the upward direction & the oil trend will be down if both these two moving averages are heading downward.
This system will indicate the oil trend is about to change one these two line cross over each other. This signal will be a god time to close trades if a trader has open trades.
Oil Trading Strategies Tips
Once a trader has come up with their oil trading strategy, they should also include the following in order to make their oil strategy more successful.
1.Oil Trading Money Management Rules
2.Oil Trading Psychology
Oil Trading Money Management Rules
Oil money management guide-lines should be part of your oil trading strategy - these rules will help you as a trader to manage risk. This means that you will use the two rules of oil trading money management - these are risk:reward ratio & draw down reducing method when placing your crude oil trades to determine lot size that you will open in the crude oil market. The most popular oil money management rule use in crude oil trading & one that you should also add to your trading plan is the rule which says a trader should never risk more than 2% of account balance on any one single oil trade.
To learn more about these two oil money management guidelines, traders should read the oil money management guide that is on the learn oil courses section of this site under the oil trading key concepts lessons.
Crude Oil Trading Psychology Mindset
In order to become successful when trading the crude oil market a trader has to learn about oil trading psychology. The oil psychology or mindset that's required to become successful in oil trading is one that avoids the emotions of fear and greed while trading the crude oil market & is a mindset of total discipline that a trader will follow all their trading rules and their oil strategy & only trade with trading signals that are generated by their oil strategy. With discipline a trader will not trade unless their oil trading strategy gives a trading signal. A trader will have the mindset of only following their oil system 100% all the time without second guessing the crude oil system. A disciplined trader will also not place trades in the crude oil market just because the crude oil market has started to move up or downward, instead a trader will wait for a trading signal to trade to be generated by their oil trading strategy.
In order to learn more about oil psychology and how to manage emotions while trading the online oil market a trader can read the oil trading psychology courses from the learn oil courses section of this site under the oil trading key concepts courses.
