How to Purchase Oil Futures

The New York Mercantile Exchange (NYMEX) is the major exchange for trading crude oil, unleaded gasoline and heating oil. Crude oil prices are closely watched by energy traders looking to profit from price fluctuations. Thanks to online trading, individual investors can open accounts and trade oil futures alongside the large institutional investors. But trading futures carries higher risks than stock trading and one mistake can wipe out a trader's account.

Step 1

Open your web browser and search for online futures brokerage firms. Compare the minimum amount needed to open an account, determine if the firm offers broker-assisted or self-directed accounts, and note the margin requirement for trading oil futures. Be sure the firm you select is registered and in good standing with the Commodity Futures Trading Commission, or CFTC.

Step 2

Complete the online trading account application and register for a demo account at the same time. By now, the broker assigned to your account will have either emailed or called you. Your broker will ask you about your trading goals and discuss the different online trading platforms available for trading oil futures.

Step 3

Download the demo trading platform you selected. Watch the tutorials to learn how the trading platform works and how to set up your charts. Pay special attention to oil futures tutorials and call your broker with any questions. Futures trading is more complex than stock trading, and your broker is there to guide you through the learning curve.

Step 4

Practice trading oil futures with the demo account. Experiment with different trading strategies and keep a log of your trading results. Analyze each successful and unsuccessful trade to learn what you did right or wrong. Practice until your winning trades exceed the losing ones. If you can’t make money trading on a demo account, you won’t do any better on a live account.

Step 5

Fund your live account when you are satisfied with your demo trading track record. When you find a suitable entry point, go to your live account and enter the trade or call your broker, who will enter the trade for you. Monitor the trade daily and have a pre-determined exit point to close out your trade.

Items you will need

  • Online futures trading account

Tip

  • The most highly traded oil future is light sweet crude. The margin requirement to trade one futures contract is $5,000. You must deposit $5,000 for each additional futures contract you want to trade.

Warning

  • Oil futures are very volatile, and unexpected price moves can result in a substantial gain or loss. The CFTC warns energy investors to only trade with money they can afford to lose.

Photo Credits

  • Comstock Images/Comstock/Getty Images

About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.

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