Coal Futures Trading Basics

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The Basics of Trading Crude Oil Futures

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Crude oil is one of the better commodities on which to trade futures contracts. The market is incredibly active, and it is well known to traders around the world. Oil prices fluctuate on the faintest whisper of news regarding pricing, which makes it a favorite of swing and day traders looking for an edge.

This volatile environment can provide some solid trading opportunities, whether your focus is on day trading futures or you are a longer-term trader. It may also provide great losses if you are on the wrong side of a price movement.

Crude oil is also one of the most actively traded commodities in the world.   The price of crude oil affects the price of many other commodities, including gasoline and natural gas. However, the ripple effect of crude oil prices also impacts the price of stocks, bonds, and currencies around the globe. 

Crude oil remains a major source of energy for the world, despite increased interest in the renewable energy sector. 

Crude Oil Contract Specs

Trading crude can be confusing when you first get into it, and you should memorize these specifications before you consider beginning to trade. 

  • Ticker symbol: CL
  • Exchange: NYMEX
  • Trading hours: 9:00 a.m.–2:30 p.m. ET
  • Contract size: 1,000 U.S. barrels (42,000 gallons).
  • Contract months: All months (Jan.–Dec.)
  • Price quote: Price per barrel (example: $65.50 per barrel)
  • Tick size: $0.01 per barrel ($10.00 per contract)
  • Last trading day: Third business day prior to the 25th calendar day of the month preceding the delivery month

Traders are also advised to understand the futures market. When you trade a futures contract you have the obligation to either buy or sell—call or put—the commodity by the expiration date at the stated price. If you hold a call, the only way to avoid actually having to take physical delivery of 10,000 barrels of crude oil is to offset the trade before the expiration. Trading futures is not for the novice. 

Crude Oil Fundamentals

Despite using it every day, not many people know the differences between crude oil and gasoline. Crude is the raw material that is refined to produce gasoline, heating oil, diesel, jet fuel, and many other petrochemicals. The fundamentals are different since it is a raw product. Crude also comes in many different grades. 

Light Sweet Crude Oil is traded on the New York Mercantile Exchange (NYMEX). “Light Sweet” is the most popular grade of crude oil being traded because it is the easiest to distill into other products. 

Another grade of oil is Brent Blend Crude, which is primarily traded in London and is seeing increased interest. Russia, Saudi Arabia, and the United States are the world’s three largest oil producers as of 2020.   Brent is the most widely used benchmark for determining gasoline prices. 

West Texas Intermediate (WTI) is crude from U.S. wells. The product is light and sweet and ideal for gasoline. It trades under the CL ticker on the Chicago Merchantile Exchange (CME) and the NYMEX

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Middle Eastern crude is known as Dubai and Oman oil. It has a higher sulfur content and falls into the category of heavy, sour oil. The Dubai Mercantile Exchange offers futures for this crude.

When crude oil is refined or processed, it takes about three barrels of oil to produce two barrels of unleaded gas and one barrel of heating oil.   This helps to put into perspective the production needs of crude, and why production and supply levels are watched so closely.

Crude Oil Reports

The main reports for crude oil are found in the U.S. Energy Information Administration (EIA) Weekly Energy Stocks report. This report is released every Wednesday around 1:00 p.m. ET, with traders eagerly awaiting its arrival. 

Tips on Trading Crude Oil Futures

Oil futures are notorious for their volatility. Here are some quick tips that you should look for when tracking price movement and making trades:

  • The price of unleaded gas and heating oil can influence the price of crude oil.
  • Demand is generally highest during the summer and winter months. Very hot summer or very active driving season (for summer vacations) can increase the demand for crude oil and cause prices to move higher.
  • An extremely cold winter causes a higher demand for heating oil, which is made from crude oil. This usually causes prices to move higher. Watch the weather in the Northeast, since it’s the part of the country that uses heating oil more than any other.
  • Watch for oil production cuts or increases from OPEC (Organization of Petroleum Exporting Countries), which determines global supply and demand for crude. 

Volatile Market for Crude Oil Futures

Crude oil often trades in a volatile environment. Major news events can happen overnight, causing oil prices to swing unpredictably and widely. The same thing can happen throughout the day since crude futures trade around the clock. Whether it’s an economic report or tensions in the Middle East, a tight supply situation can exacerbate price movement. 

Supply and demand obviously dictate how the price will move, but this market moves on emotion as well, especially with retail investors who day trade.

If tensions escalate in the Middle East, there’s no telling the extent of possible supply disruptions, and traders often react swiftly on the news, adjusting their strategy following price fluctuations.

Price Movements for Crude Oil

The reason prices move so swiftly is that traders who have short positions in the market tend to cover their shorts quickly if price creeps up, either eroding their gains or causing losses. In order to do this, they have to place buy orders to cover. This wave of buying is done at the same time speculators are jumping on board to establish or add to long positions. The shorts will cover quickly because the risk is just too great; if a major development arose that disrupted supply, shorts could theoretically lose more money than they invested, resulting in a margin call from their brokerage, one of the most dreaded calls in the world of investors.

The usual tendency is for oil prices to spike on news of turmoil in the Middle East. Then prices calm down and start to move lower unless there’s irrefutable evidence of major supply disruptions. Identifying these waves of buying and selling is very important if you want to avoid getting a haircut in the financial markets.

For the most part, crude oil tends to be a trending market, driven largely by psychological movement. There’s usually a major bias to the upside or downside. Trading from the trending side will certainly help improve your odds of success. Crude oil also tends to get stuck in prolonged ranges after a sizable move. A person who can identify these ranges has plenty of opportunities to buy at the low end and sell at the high end. Some investors trade the ranges until there’s a clear breakout either way.

The value of the U.S. dollar is a major component in the price of oil. A higher dollar puts pressure on oil prices.   A lower dollar helps support higher oil prices. Crude oil also tends to move closely with the stock market. A growing economy and stock market tend to support higher oil prices. However, oil prices moving too high can stifle the economy. Historically, oil prices tend to move opposite the stock market. This trend becomes a concern when oil prices approach the psychological price marker of $100 a barrel.

Day Trading Crude Oil Futures

Crude oil is one of the favorite markets of futures day traders. The market typically reacts very well to pivot points and support and resistance levels. You have to make sure you use stops orders in this market. Stop orders are automatically triggered trades that can help reduce the high risk of a market that can make very swift runs—up or down—at any given time.   Longtime energy trader Mark Fisher wrote an excellent book on day trading oil futures titled The Logical Trader.

There’s no shortage of trading opportunities. Most traders close their position end-of-day (EOD) to ensure they sleep at night, considering overnight volatility.

Many of the same principles that apply to stock index futures also apply to crude oil futures. If you like trading the E-mini S&P, you’ll probably like crude oil, too.

Crude oil entered a bear market in June 2020 when the price was just under $108 per barrel on the active month NYMEX crude oil futures contract. By February 2020, the price depreciated to under $30 per barrel. In January 2020, the price was trending around $53.84 per barrel for WTI Crude. As of December 27 2020, the price is on the rise at $61.72 per barrel. 

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Futures Trading Systems

Last updated on November 6th, 2020

Many traders I come across seem to start off by trying to day trade stocks or Forex and for many years this concept was pretty alien to me.

If you want to be an active day trader, futures are really the way to go. But to some, the world of futures trading is a dangerous business – a world where fast money and blown up accounts often go hand-in-hand.

The simple fact is that this is not an unusual reality in the industry. But there’s another reality for those who understand the risks involved and maintain appropriate safeguards: trading futures markets is one of the most efficient ways to use your capital.

LEVERAGE In The Futures Market

Leverage certainly has the potential to be a case of Dr. Jekyll and Mr. Hyde. I don’t think it’s too hard to find horror stories of traders being over-leveraged and blowing up their accounts. It’s not uncommon for a trader who has taken a few “bad beats” to go “on tilt”, trade erratically and double up (or perhaps worse) on their losing positions.

But even without this very real aspect of trading, many traders just don’t realise what the odds of them having a sustained period of draw down are and so they are less likely to fully appreciate the need to address how much capital they should risk over how much capital they can risk.

Let’s look at some figures to put into perspective just how much leverage you can get as a trader of futures.

The E-mini S&P 500 (ES) trading at a level of 1600 gives a trader control of $80,000 of product (index level x $50 per point for this product). Current CME exchange margin is $3,850 per contract which equates to a leverage of roughly 20:1.

Whilst that’s pretty high it’s not exceptionally so. Enter the brokers.

For day trading, brokers offer a much lower intraday margin rate. In theory a low intraday margin is useful for a well-capitalized account if you don’t want to leave all of your capital sitting in your account.

However, in practice many traders will use these low margins to trade with much less capital than is realistically required. Typically a broker will offer you $500 intraday margin and I’ve seen as low as $400 per contract for the ES.

At the same 1600 level that’s a leverage of 200:1.

That’s 8 points to zero or a 0.5% move in a product that typically has a primary session range of 10-20 points. And it’s important to note that margined accounts can fall below zero, meaning that if the market moves sharply against you and losses are greater than the capital in your account, you will be liable for the difference.

But just like everything else in trading, it’s an individual’s responsibility to ensure that they fully comprehend the risks involved and act in their own best interests. If you take account of the risks, the ability to highly leverage your trading capital can be a powerful ally.

If you have a genuine edge in the market that has demonstrated will make money over time, then being able to trade more contracts than you would normally with the capital you have is a distinct advantage. If you stick to a 1-2% risk per trade with a 2-3 point stop in the ES, you only need $5,000-15,000 per contract for example.

Clearly there’s the opportunity to turn a relatively small amount of capital into a great return.

Futures Markets Have Great LIQUIDITY

In fairness, there are plenty of futures instruments that have poor liquidity just as anything else could that you might look to trade. But there are reasonably high numbers of really great products to trade, with a variety of different behavioral features and risk profiles that also have fantastic liquidity.

Many instruments don’t even have a bid-ask spread in the front month contract.

An important point is that futures contracts are agreements to deliver (or take delivery of) the underlying product at a certain date and therefore they expire. So if you hold a long (buy) position in Crude Oil into expiry, you will be expected to take delivery and pay for a whole load of barrels of Crude Oil.

Some products are cash settled instead like the ES for example. It’s for this very reason that a futures trader will never normally want to hold a position into expiry. The front month is the nearest expiring futures contract (except when approaching the expiration date) and this is where the liquidity for an instrument is normally found.

The main point about liquidity though, is that you’ll never really have a problem getting into or out of a position in the markets.

CENTRALIZED REGULATED EXCHANGES

The futures industry is highly regulated and whilst there are those who try to get away with nefarious activities, they are often identified swiftly and dealt with appropriately. Regulatory requirements are stringent and are there to protect traders.

And because the exchanges are centrally cleared, effectively meaning that all trades goes through the exchange (although this isn’t 100% accurate it is true for the most part), there is accountability for all trades that take place. Simply put, you get what you see in most cases when you trade. Direct market access means no funny business from your broker too. Your trading platform links into the exchange.

Because of this, the quality of futures markets is high.

The bottom line is that if you are a sensible, responsible trader who treats this as a business, futures markets offer a fantastic way to trade. They are efficient, cost effective and properly regulated. Sure, like any other product there are a few nuances to learn.

But if you’re serious about trading and day trading in particular, you should seriously consider trading futures.

Compare Brokers For Trading Coal

For our coal comparison, we found 9 brokers that are suitable and accept traders from Russian Federation.

We found 9 broker accounts (out of 147) that are suitable for Coal.

AvaTrade

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About IG

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68% of retail investor accounts lose money when trading spread bets and CFDs with this provider

Read our in-depth IG review

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69% of retail investor accounts lose money when trading CFDs with this provider

Plus500

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76.4% of retail CFD accounts lose money

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68.5% 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.

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72% of retail investor accounts lose money when trading CFDs with this provider

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83% of retail investor accounts lose money when trading CFDs with this provider.

SpreadEx

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67% of retail investors lose money when trading spread bets and CFDs with this provider.

Admiral Markets

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What can you trade?

  • Forex
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About Admiral Markets

Platforms

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Funding Methods

  • Credit cards
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83% of retail investor accounts lose money when trading CFDs with this provider

Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.

The Ultimate Guide to

Trading Coal

Coal is among the leading forms of non-renewable energy resources in the world. It has had a remarkable effect on the world’s energy supply since the advent of industrialisation in 19 th century. The most notable form of coal is anthracite, which is the highest ranked form of coal due to its high carbon content and therefore excellent burning properties. It is also known as hard coal or black coal.

Coal is a fossil fuel, along with petroleum and gas. It is composed mainly of carbon created from the remains of ancient plant and animal life forms dating back over 300 million years. As such it is a finite resource and once exhausted, alternative energy sources will be necessary. For now, however, it continues to be available in abundance, and is mined from pockets underground.

The largest coal producing country is China, and it has held this status for over three decades. Other major producers include the USA, Australia, India, and Indonesia. In terms of production, the largest company is Coal India Limited which in 2020/17 produced over 598.6 million metric tons of coal (statista). Of the countries with the leading coal reserves, Colombia ranked first in 2020, with 4.88 billion metric tons (statista).

Coal is mainly used for generating electricity and steel manufacturing. As around half of the US’s electricity is still produced from coal, for the time being, domestic power continues to be heavily reliant on this fossil fuel.

Fundamental Influences

There are several types of coal and a number of factors affect the price of each. The different types include Peat, Lignite, Bituminous and Anthracite, and they vary in their carbon content.

An important factor affecting all types of coal is environmental awareness, which influences the demand and supply of coal. When coal is mined, methane is released, having adverse environmental effects. Similarly, pollutants are released when coal is burned. There are therefore calls from Governments and citizens for industries to shift to a less polluting energy resource.

Coal does however produce other byproducts when it is burned, which can be useful, for example plastics, cement, and tar (used on roads). The demand for these products can increase the demand for coal.

The price of other fuels also has a major impact on the price and demand for coal. When the other fuels rise in price, coal seems an attractive option and the demand increases. Likewise, when the price of other fuels decreases, the demand of coal will consequently decrease.

As for the supply of coal, there are multiple factors in play including freighting costs (as large quantities of coal are traded internationally), technical issues in mining, weather conditions, and production costs.

How is coal traded?

Coal is traded on exchanges and on over-the-counter markets. It is not a commodity that is heavily traded though, as it’s difficult to transport and the transportation charges significantly increase the price.

Coal can be traded as futures, as standardised contracts where the seller agrees to provide delivery at a future date. The price and amount are finalised at the time of signing the contract. Coal futures and options are offered by the Chicago Mercantile Exchange Group (CME).

Another common method for acquiring positions in the coal industry is through the stocks of coal producers and related companies, and Exchange Traded Funds (ETFs).

The VanEck Market Vectors Coal ETF aims to track the performance of the Stowe Coal Index (which has the ticker COAL) by investing in global companies with a market cap of over $200 million whose revenues are based on the coal industry. The ETF can be traded as a contract for difference (CFD) through many regulated online platform providers, such as IG.

Advantages of Trading Coal with CFDs

Trading with CFDs means taking a position based on speculation that whether the price of the underlying commodity (or index tracking the commodity) will rise or fall. Leverage is offered by many brokers which can be used to gain a greater exposure to the price fluctuations.

However, this also exposes the trader to greater risks, so they should ensure they understand the risks before placing a trade. Registering with an authorised and regulated broker from a country with a strong regulatory reputation is recommended as this will minimise the chance of unfair treatment with regards to money held with the broker.

Spot Coal vs. Coal Futures

Based on the price at which coal is currently trading

Position usually predicts that the price will rise

Usually purchased with the intention of taking delivery

Volatility factors, such as weather changes, are more predictable

Price is based on projected price of future delivery

Trades are usually to take advantage of price movements, rather than for the purpose of taking delivery at the end of the contract

Volatility issues are less predictable and the price can be subject to sudden movements

Alternative Commodities to Coal

Why Choose AvaTrade
For Coal?

AvaTrade scored best in our review of the top brokers for coal, which takes into account 120+ factors across eight categories. Here are some areas where AvaTrade scored highly in:

  • 12+ years in business
  • Offers 250+ instruments
  • A range of platform inc. MT4, Mac, Mirror Trader, ZuluTrade, Web Trader, Tablet & Mobile apps
  • 24/7 customer service
  • Tight spreads from 0.70pips
  • Used by 200,000+ traders.
  • Offers demo account
  • 4 languages

AvaTrade offers four ways to tradeForex, CFDs, Spread Betting, Social Trading. If you wanted to trade COAL

The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.

AvaTrade have a AAA trust score. This is largely down to them being regulated by Central Bank of Ireland, ASIC, IIROC, FSA, FSB, UAE and BVI, segregating client funds, being segregating client funds, being established for over 12

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