Crude Oil’s New Reality: Price Action

Crude Oil’s New Reality: Price Action

If you are a crude oil trader and you are not a price action trader, your days are numbered. The fundamental  information (news) for crude oil comes out fast and furious and every few days. There’s the American Petroleum Institute or the “API” report on U.S. crude oil and gasoline inventories which comes out on Tuesday afternoon. The Energy Information Administration or “EIA” inventory and production report on crude oil, gasoline and other distillates (like diesel and jet fuel) comes out on Wednesday morning and is produced by the U.S. Department of Energy. The Baker Hughes rig counts which come out on Friday afternoon (and has for over 75 years), reporting on the number of oil and gas rigs added or subtracted from the total U.S. count of rigs; keep in mind, these are just the weekly reports. Then you’ve got a pair of monthly reports put out by The Organization of Petroleum Exporting Countries “OPEC” and the International Energy Agency of the “IEA” (a Paris-based, autonomous intergovernmental organization) and various random and scheduled statements coming out of the mouths of energy ministers from OPEC nations and large Non-OPEC producers like Russia. Trying to predict crude oil on a short-term basis by reading the news is like trying to count the starts…with someone spraying a hose in your eyes.

The reality is, the only way to trade crude oil on a short term basis is with price action. Crude oil is a true supply and demand market and longer term, the price is driven by how much oil is on the market versus how much demand there is and what the available storage is like. It should only be those 3 things that you need to look at, but given that front month price is driven by speculation, you have to work with a price action strategy. The back months in the crude oil curve often tell you where price is going in the big picture, but not in any short term view.

So if you insist on trading crude oil (which isn’t a bad thing given the price movement) do the smart thing and look for a price action strategy that suits your personality and trading style. You’ve taking the first smart step in exploring Nadex, with their limited risk products and CFTC regulatory oversight. You can hone your price action skills in a volatile market with the controlled risk you need to trade crude oil by using Nadex binary options and spreads. You can also find many good price action suggestions on this site, by reading our articles, along with others at this URL. Got luck finding your own black gold.

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