Writing a Oil Trading Plan
In oil trading there is no single method or formula that is used for trading the crude oil market successfully. The oil market requires traders to learn and acquire the skill required to trade the crude oil market successfully. Oil traders need to learn how to analyze the crude oil market movements. Oil traders then need to come up with a plan of how to come up with a way of combining this knowledge and the strategies they have learned so as to formulate their overall trading method.
By coming up with an effective trading plan your success will improve significantly. A oil trading plan will help you to effectively analyze the crude oil market and know when the best time to open a trade is and when it is best to close the trade.
Before starting to trade the oil trading you must be prepared with a oil trading plan. Just like in business where all successful businesses start with a business plan also successful oil traders must begin with a oil trading plan.
Sections of a Oil Trading Plan
Oil Chart
The first section of a oil trading plan will specify the trading instruments that a trader will be trading. Oil traders should specify the instruments which are best suited for their trading method.
Before deciding the most suitable trading instrument to trade a trader will have taken time to test their oil trading strategy on various oil charts on a demo practice after which they will choose the trading instrument that produces most profitable results. The trader will then list this trading instrument on the trading plan as the instrument that they trade.
Oil Trading Chart Time-frame
The trader will also have to specify the chart timeframe they will be using to trade oil with. For example a trader may find that the best chart timeframe for their trading system is the 15 minute chart timeframe and therefore they will specify their chart timeframe as the 15 minutes chart time frame.
The chart timeframe that a trader chooses will depend on the type of trader they are. For day traders who have a lot of time to watch the charts they can choose the 5 minutes or 15 minutes chart timeframe and trade with these charts. For swing traders who don't have a lot of time to watch the crude oil market they can trade with the 1 hour oil chart timeframe so that they can be able to follow the medium term trends that will last for a one or two days.
Oil Trading scalpers on the other hand can trade with the 1 minute chart timeframe and trade the short term market moves. These traders will make many trades during the day and just like day traders they will also have a lot of time during the day to watch oil market moves.
Oil Trading System
This section will specify the oil trading system that the trader will be using to trade the crude oil market. This section will list the rules that a trader will follow when opening a buy or sell oil trade. It will also list the rule that a trader will follow when closing their trades - for example it will note the take profit levels as well as stop loss levels that a trader will set after they have opened a trade.
Trader will write-down if they will be using an technical indicator based trading system to generate oil trading signals or the trader will write if they will be using support & resistance levels to open & close trades or any other technique that the trader will be using for trading. For examples a trader may specify that they will be using automated oil systems and they will write the parameters of the automated crude oil trading bots on this section.
Before writing the oil trading system that a trader will be using, the trader will have back tested this crude oil system on demo practice account until the time that the crude oil trading system is producing profitable trades on a consistent basis and after coming up with a profitable oil trading system the trader will then write down the crude oil system on this section of their trading plan.
Mindset
This section will specify the mindset that you'll be following when trading in order to ensure that you become successful when trading.
Discipline – This will list that you will be disciplined enough to follow the rules of your crude oil system & trading plan. Discipline will mean that you will be patient enough to wait for a trading signal from your oil trading system before opening a trade. This section will specify that you will only trade the signals that are generated by your crude oil system and you will not second guess your crude oil system and open trades not indicated by your trading system.
Trade Without Emotions - when it comes to trading the crude oil market you should not let the emotions of fear and greed control you when you’re trading. You should always trade based on the rule of your trading plan. Avoid becoming greedy & wanting more profit from the same trade instead of closing the trade at your take profit level.
Crude Oil Trading Money Management
A trader must specify their oil trading money management guidelines that they will use when trading. For example a trader can specify that they will use a high risk: reward ratio which means they will place their take profit level at two times what they set their stop loss level. This will make their oil strategy more profitable in the long run because they stand to make more money from their winning trades & lose less money from their losing trades.
