If you’re interested in engaging the global crude oil complex, you need to be aware of these two futures contracts: North Sea Brent (Brent) and West Texas Intermediate (WTI). Although Brent is widely viewed as the international standard for crude oil, WTI has become the futures industry’s energy benchmark. Featuring an average daily volume of more than 1 million contracts, WTI provides active traders a unique collection of opportunities.
Why Should I Trade WTI Crude Oil?
Available on the Chicago Mercantile Exchange (CME) courtesy of the New York Mercantile Exchange (NYMEX), WTI crude oil futures (listed under the symbol CL) are exceedingly attractive to active traders. CL futures garner participation from institutional and retail participants from every corner of the globe ― more so during times of geopolitical or economic strife.
One illustration of WTI’s popularity is year-over-year volume growth of more than 30%. While this explosive expansion is best considered atypical, it does suggest that WTI is rapidly becoming a premier destination for traders and investors. This is due in-part to several favorable circumstances available in CL futures:
- Volatility: Daily trading ranges are generally substantial. In addition, price has a tendency of reacting to fundamentals by trending directionally or reversing course suddenly.
- Liquidity: The robust depth-of-market for WTI crude promotes trade-related efficiency. While slippage and subpar fills are unavoidable regardless of product, WTI’s strong order flow largely mitigates these negative factors.
- Public interest: Due to the global economy’s dependence on fossil fuels, oil is one of the most heavily scrutinized markets in the world. High degrees of public interest ensure consistent participation, promoting both liquidity and volatility.
These characteristics of CL futures bolster trade-related efficiency to levels not seen in every contract. No matter if you’re a fundamental trader or chart technician, you have multiple ways of cashing in on the WTI market.
Developing an Edge in WTI Crude Oil
Successfully trading any product is all about developing an edge in the marketplace. At its core, an edge does one thing: It makes money! This is accomplished by capitalizing on positive expectation trade setups that competently align risk to reward. Many active traders view CL futures as the premier environment for finding an edge.
Here are a few strategies traders commonly use to gain an edge in the WTI crude oil market:
- Breakout trading: The bold price action of WTI crude attracts breakout traders of all types. Candlestick chart patterns frequently prove effective due to the tendency of CL futures to become compressed before breaking out.
- Trend-following: Given the inherent volatility of WTI, trend traders are frequently able to generate extraordinary profits while keeping risks palatable.
- Scalping: Lightning fast moves in pricing occur in the WTI market on a daily basis. The rapid price action is extremely beneficial to short-term scalpers interested in banking small profits quickly.
- News trading: The crude oil inventories cycle provides plenty of fundamentals, multiple times each trading week. Release of supply data from the American Petroleum Institute (API) and Energy Information Administration (EIA) guarantee news traders at least two unique opportunities per week.
The behavior of WTI’s price action is the essential characteristic contributing to the success of these strategies. Movements in price are often extremely rapid and directional, ideal for ultra-short term scalpers as well as intraday trend traders. In addition, seasonal patterns and regular inventories reports wield significant influence on WTI, which is great for fundamental methodologies.
No matter what kind of trader you are, there’s rarely a dull moment in WTI crude.
Looking for Your Edge? Check Out CL Futures
Global oil has a long and storied history of being a ferocious market. Wars, politics, and technology all skew the evolving dynamic and, in turn, pricing. If you’re interested in profiting from volatility, then WTI crude oil may be the market you’ve been looking for.
A great place to get started trading crude oil is through a no-obligation consultation with an industry pro at StoneX. With more than two decades experience addressing global energy, the team at StoneX is a valuable resource for your venture into the marketplace.
