Thursday 1 October 2020 10:35 amFXCM Talk

Spotting the right opportunity, at the right time

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Craig has worked in the foreign currency and CFD trading industry for the last 10 years, and is currently the CFD Product Manager of FXCM, where he primarily oversees the suitability and expansion of the tradeable product line.

For an active trader, volatility always represents opportunity.

As the most traded commodity in the world, this is especially the case for traders in the oil markets. 

Oil has traditionally been viewed as a relatively safe bet. While there are countless examples of a stock price dropping greater than 50 per cent in an instant or 25 per cent daily Crypto swings. For oil, 10 per cent fluctuations in one day were often referred to as record breaking. After all, this is a tangible asset, people will need oil in their cars to get to work tomorrow. 

In turn, as a globalised market, oil prices are incredibly sensitive and constantly fluctuate in response to politics, economics, and the forces of supply and demand. Thus, for day traders looking to profit from rapid movements in the market, but not risk the loss of an entire investment, it’s no surprise that leveraged futures oil trading made for the ideal trading instrument. 

Yet, as the dramatic price fluctuations plunged Oil Futures into the negatives during the peak of the COVID-19 crisis, that very idea of Oil Futures as one of the most reliable tradeable assets was disproven. Global lockdowns saw cars parked, planes grounded, the lowest U.S. petroleum consumption in decades and the storage tanks in Cushing reach capacity.

This precise fragility of balance between supply and demand has opened swathes of opportunities for day traders to capitalise on and such an unprecedented event has drawn a surge of new traders looking to speculate on the recovery of oil. While there are plenty of oil related instruments to pick from, for many, one of the easiest way to speculate on oil is with FXCM’s Spot Oil CFDs.

In contrast to trading Oil on the futures exchanges, contract sizes for CFDs can be much smaller and are therefore more accessible for most day traders. After all, the cost of entry to buy and sell a 10-barrel contract is much lower than a 1,000-barrel contract, the standard minimum in the futures market. Traders can trade as much or as little as their account allows, meaning they can speculate in a way that specifically accommodates the level of risk they wish to take on or limited disposable income they have available.

In addition to the CFD sizing, FXCM’s Spot Oil CFDs are non-expiring and priced using an algorithm that accounts for the price movements of multiple futures contracts at one time. 

This provides an added measure of flexibility and risk management for the trader because they can now avoid the potential illiquidity and extreme volatility of a futures based contract that is approaching its expiry. Instead, traders can open and close their position as they see fit and are less at the mercy of sudden market moves. 

In times like these, it is both understandable why traders do not wish to commit for weeks or even days to a position or alternatively why they would prefer to keep a position open long term and try to capitalise on a potential Oil rebound. It is precisely this uncertainty that FXCM is addressing. We are providing retail clients with the opportunities to speculate on current volatility in a way that is both flexible and provides a means to mitigate risk for a highly in-demand asset. With over two decades of expertise, FXCM’s wealth of market-leading knowledge provides all type of clients with the most sought-after investment and hedging opportunities on the world’s most popular trading instruments.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 

75.38 per cent of retail investor accounts lose money when trading CFDs with this provider.

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

To learn more about FXCM, visit www.fxcm.com/uk 

FXCM is a leading provider of online foreign exchange (FX) trading, CFD trading, and related services. Founded in 1999, the company’s mission is to provide global traders with access to the world’s largest and most liquid market by offering innovative trading tools, hiring excellent trading educators, meeting strict financial standards and striving for the best online trading experience in the market. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. In addition, FXCM offers educational courses on FX trading and provides trading tools, proprietary data and premium resources. FXCM Pro provides retail brokers, small hedge funds and emerging market banks access to wholesale execution and liquidity, while providing high and medium frequency funds access to prime brokerage services via FXCM Prime. FXCM is a Leucadia Company.

Trading Forex/CFDs on margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you. The products are intended for retail, professional and eligible counterparty clients. Retail clients who maintain account(s) with Forex Capital Markets Limited (“FXCM LTD”) could sustain a total loss of deposited funds but are not subject to subsequent payment obligations beyond the deposited funds but professional clients and eligible counterparty clients could sustain losses in excess of deposits. Clients who maintain account(s) with FXCM Australia Pty. Limited (“FXCM AU”), FXCM South Africa (PTY) Ltd (“FXCM ZA”) or FXCM Markets Limited (“FXCM Markets”) could sustain losses in excess of deposits. Prior to trading any products offered by FXCM LTD, inclusive of all EU branches, FXCM AUFXCM ZA, any affiliates of aforementioned firms, or other firms within the FXCM group of companies [collectively the “FXCM Group”], carefully consider your financial situation and experience level. If you decide to trade products offered by FXCM AU (AFSL 309763), you must read and understand the Financial Services Guide, Product Disclosure Statement, and Terms of Business. Our FX and CFD prices are set by us, are not made on an Exchange and are not governed under the Financial Advisory and Intermediary Services Act. The FXCM Group may provide general commentary, which is not intended as investment advice and must not be construed as such. Seek advice from a separate financial advisor. The FXCM Group assumes no liability for errors, inaccuracies or omissions; does not warrant the accuracy, completeness of information, text, graphics, links or other items contained within these materials. Read and understand the Terms and Conditions on the FXCM Group’s websites prior to taking further action. 

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