Gold futures book third straight gain, hold near 6-year high

Gold prices on Tuesday finished regular trade modestly higher, marking a third straight gain a day after the precious metal extended its rally toward fresh six-year highs, amid escalating trade policy tensions between China and the U.S.

Gold for December delivery GCZ19, +1.54%  on Comex rose $7.70, or 0.5%, to settle at $1,484.20, after ending 1.3% higher on Monday, extending its highest finish for a most-active contract close since 2013, according to Dow Jones market data.

September silver SIU19, +3.52% added 5.2 cents, or 0.3%, to end at $16.445 an ounce Tuesday, after booking an 0.8% gain in the prior session.

Bullion has been gaining traction on the back of worries that the U.S.-China tariff conflict won’t subside soon. An environment with debt yields also hovering at ultralow levels, and in many cases negative levels, also has supported buying of the yellow metal, which tends to rise during times of global economic uncertainty.

On Tuesday, equity markets recovered some ground, after seeing the biggest one-day fall of the year on Monday, after China’s central bank fixed its widely watched onshore currency at a level higher than expected, a move interpreted by some as a sign of some softening in trade tensions.

Still, commodity traders said gold and other precious metals could prosper against a backdrop of weakening global economic growth and continued anxieties on international trade with no immediate resolution in sight.

 “Gold is positioned to remain one of the prime destinations of safety this week as the horrible combination of U.S.-China trade disputes and global growth concerns boost appetite for safe-haven assets,’ wrote Lukman Otunuga, senior research analyst at FXTM, in a Tuesday research note.

“For as long as risk appetite is dented by global growth fears, trade drama and Brexit uncertainty among many other geopolitical risk factors, gold bulls will remain in the driving seat,” he wrote.

Meanwhile, the 10-year benchmark Treasury note TMUBMUSD10Y, -3.81% was yielding 1.73% on Tuesday, little changed from its Monday levels, as prices and yields move inversely. The U.S. Dollar Index DXY, +0.08%  was 0.1% higher at 97.63.

“With over $12 trillion of negative-yielding debt saturating the market, the relative attractiveness of gold continues to increase. As a result, gold-backed ETFs took in $2 billion in July, making June and July the highest back-to-back inflow months since June 2016,” wrote Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors, in a Tuesday note.

Exchange-traded fund SPDR Gold Shares GLD, +1.27% is up 14.6% so far in 2019 after climbing 0.9% Tuesday afternoon, while the miner-focused VanEck Vectors Gold Miners ETF GDX, +1.93%, which was trading little changed on the day, has returned 36% year to date.

Elsewhere on Comex, October platinum PLV19, +2.46%  lost $4.70, or 0.5%, to $853.20 an ounce, after rising 0.8% on Monday. September palladiumPAU19, -1.07% picked up $20.70, or 1.5%, to $1,437 an ounce, more than recovering from a 1% decline on Monday.

Read: Palladium drops over 7% to log biggest loss in months

September copper HGU19, -1.97%  rose 2 cents, or 0.6%, to $2.56 a pound, bouncing back from a 0.6% skid a day ago.

marketwatch.com

Learn How to Trade Crude Oil CFDs

Have you ever noticed how crude oil tends to show volatile price movement? These price fluctuations make it tempting for many to trade crude oil, especially now that traders can simply trade oil (WTI) online via a simple platform. This article reviews how and why oil prices move, which factors impact oil price, how traders can trade oil/WTI, the risks involved with trading oil/WTI, and the strategies for trading WTI charts. 

The Basics of Crude Oil Commodities

Crude oil is unrefined petroleum and fossil fuel. It is composed of hydrocarbon deposits and other organic materials, and can be refined to produce usable products such as gasoline, diesel, petrochemicals (such as plastics), fertilisers, and even medicines. Oil is a basic and critical component in the global economy, which is why it has a large impact on our daily lives, and why it is closely followed by economists, businesses, and traders alike.

Therefore the price movement of oil is important. When oil becomes more expensive, it raises the costs for consumers directly (oil at the gas station) and indirectly (products made by oil, or used by companies to produce). Cheaper oil indicates lower costs for consumers.

Here is the long-term impact:

• Higher oil prices tend to make products more expensive, which in turn undermines economic growth, as it creates potential for inflation and interest rate hikes.
• Lower oil prices tend to make products more affordable, which in turn stimulates economic growth, as it reduces the potential for inflation and interest rate hikes.
• Very low prices could lower the supply, as producers may cut their current production or suspend new oil projects.

Oil prices are frequently changing and fluctuating day by day, minute by minute. The prices are influenced by a wide range of factors.

Here are the main ones to consider:

• Increase or decrease in supply by the oil producers
• Increase or decrease in demand by the oil users and importers
• Subsidies for oil companies or other energy companies
• International politics (agreements made between countries)
• Internal politics of an oil producer
• World wide supply of oil
• Competition from other energy sources
• Geopolitical tensions and insecurity (tends to increase prices)
• Usage of oil and its fundamental outlook

You might be wondering how does supply and demand impact price? In general, higher supply and lower demand reduces prices, whereas, lower supply and higher demand increases prices. That being said, there are two main factors that impact supply and demand. Let’s review them.

Point 1 Supply: oil production levels

Oil is a resource that is not located in every country, and hence the production of oil is concentrated. Oil is produced in 100 countries, which is about half of the world. Five of those countries generate 48% of the world’s total crude oil production. This gives these oil producing countries and oil associations (such as Opec) more power to control their supply and impact price.

They can decrease their oil production to stop prices from falling, or to help increase them. They can increase their oil production if they believe the price is good (i.e. expensive enough) to sell and make a profit.

Point 2 Demand: health of the global economy

Demand for oil grows when the global economy is performing well, because consumers are buying more products (where oil is often used for creating goods), companies are shipping and transporting more goods (due to higher demand), companies are investing more (to create enough capacity), and within the business world, consumers are travelling more for business and leisure. A weakening global economy has the opposite effect, and decreases demand for oil.

If you’d like to try trading with CFDs on oil in a risk-free trading environment, you can do so with a FREE demo trading account at Admiral Markets. Test your strategies, hone your trading skills, and practice until you are ready to transition to the live markets. Click the banner below to open your demo trading account!

Trading Crude Oil Commodity

Like with all other types of trading, traders need to take risks in order to make profits, and in that process are able to lose their trading capital. In exchange for that risk however, a trader has the opportunity to earn profits via the price movements in oil by:

• Buying and selling higher (long setup)

Or

• Selling and buying lower (short setup).

Traders can use various forms of fundamental, wave, and technical analysis to increase their chances of success, and their ability to earn profits. But keep in mind that each trade can end up as a win or loss, and there is never a guarantee as to how prices will behave and move.

How do you trade oil (WTI)?

Oil can be traded online, and you can open a Demo account or a live trading account to do so. Traders use trading platforms such as MetaTrader 4 (MT4) or MetaTrader 5 (MT5) to enter, manage, and close setups. The good news is that you will not physically receive the crude oil yourself, and traders can instead buy and sell oil (WTI) CFDs through online trading.

Admiral Markets offers the ability to trade on MT4 and MT5, as well as, through MetaTrader WebTrader (for traders who want to avoid downloading any software, and instead use their web browsers for trading). Admiral Markets also provides MetaTrader Supreme Edition, a plugin for MT4 and MT5 which enhances the trader’s experience by providing a range of additional tools such as: The ‘Mini Terminal’, the ‘Tick Chart Trader’, access to news in real-time, and much more.

What is a CFD?

CFD stands for contract for difference. It allows you to trade price changes in oil futures and options, but without the need to handle contracts. This in turn offers the benefits to traders, that you can use a single trading platform for trading oil (WTI) and other financial markets.

What is WTI?

WTI stands for West Texas Intermediate. This is one of the two most popular and well known benchmarks for trading oil on MT4. The second is Brent Crude.

How do I start?

Here are the first three steps involved with online oil trading:

1. Create an account
2. Choose your trading platform
3. Start trading

What are the benefits of trading crude oil (WTI)?

Trading WTI CFD offers multiple benefits, but the volatility (large price movements) are probably its best advantage. The oil price tends to move up and down with substantial swings (as traders can see on the chart below). The price movement offers the potential for traders to capitalize on these movements through intra-day trading, intra-week trading or swing trading.

Depicted: Admiral Markets MT5 with MT5SE Add-on WTI CFD – Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

Strategies for Trading Oil (WTI CFD)

After finding a broker that will enable you to engage in online oil trading, it is best to think about how to trade oil (WTI) from a strategic perspective. It is critical to implement proper risk management when trading, but it is also valuable to apply specific oil trading strategies. Most trading methods can be split into different styles and time frames.

Here is a summary of the main methods for trading CFDs on oil, commodities, and other financial instruments:

Trading styles

• Fundamental analysis: reading, analysing and using data, news, and statements to make assessments about future supply and demand
• Technical analysis: this technique analyses price charts via candlesticks (or bars) and indicators to pinpoint trade setups that offer higher probability and a positive expected equity curve in the long-term
• Wave analysis: this method analyses price patterns on the chart to understand the context, market structure, and whether there are any trading opportunities

Time frames

• Long-term traders use higher time frames such as weekly or daily charts.
• Swing traders use middle time frames such as 4 hour and daily charts.
• Intra-week traders use mid-low charts like 1 hour and 4 hour charts.
• Intra-day traders use lower time frames such as 15 and 60 minute charts.
• Scalpers use very low charts like 1 and 5 minute charts.

Different Time Frame Combinations

Although traders can combine all time frames and styles for a long list of combinations, a couple of them that are more common. Let’s review the usual methods:

• Fundamental and long-term: when traders trade WTI using fundamental analysis, they can use long-term forecasts to setup a long-term trade on higher time frames – if it’s available. Fundamental changes are slower, so there will be less trade setups with this style, but it also requires less time.

• Fundamental and short-term: when traders use data releases and news events for trading purposes, they usually focus on short and quick trade setups, which are done on lower time frames. These types of traders will use specific tools in which provide economic announcements, forecasts, predictions and more. Admiral Markets provides a ‘Forex Calendar‘ which provides this type of information.

• Wave analysis and medium & long-term: wave patterns are most useful for trading on 1 hour charts or higher. When you start using this type of analysis, it might be more effective to initially focus on the 4 hour charts and higher. The reason is that interpreting wave patterns takes experience, and it is easier to understand and interpret the dynamics of a higher time frame chart, in comparison with a fast moving one such as a 15 minute graph.

• Technical analysis and medium-term: technical analysis can be used for long-term trading and higher time frame charts, but is more often used for quick entries and exits. Traders can also use technical tools to create a more robust trading plan. Tools often include trend lines, moving averages, Fibonacci, and oscillators.

• Technical analysis and short-term: scalpers are more inclined to use trading indicators that make calculations automatically. They tend to use indicators such as the Parabolic, Keltner Channel, and Pivot Points, rather than manual tools such as trend lines and Fibonacci, because the price moves quickly on lower time frames, and decisions need to be made equally fast.

• Combination of all three: some traders do not want to limit themselves and like to combine all three methods in a grand approach. Although there is some benefit in traders picking up different views, there is also the risk that they get stuck in “paralysis of analysis” and find themselves being unable to make a decision.

Trading Plans and Trading Systems

As you can see, these elements can be combined to form trading strategies. Trading systems usually include a list of key components such as: 

• The form of analysis
• Time frames
• Risk management approach
• Entry methods
• Filters (reasons not to enter)
• Trade management (including market exit and trail stop loss)
• Exit methods (including stop loss and potential targets)
• Feedback and evaluations

Although this might seem like a long list, it is worthwhile to carefully consider all aspects before trading, as it helps traders build a more consistent approach for the long-term.

Trading strategy example

Here is an example of a discretionary trading approach using technical analysis on a WTI CFD 4-hour chart. Keep in mind that this just a simple example of how traders could combine different tools and indicators to form trading decisions. This trading method has not been tested in real trading, and traders should only use it for example purposes. Let’s take a look at this example strategy which is based on single time frame analysis (4 hour chart) using the MT5 platform, and the MetaTrader Supreme Edition plugin.

Add the following tools to your MT4 or MT5 platform:

• 100 ema (moving average) close
• Keltner channel from the MetaTrader Supreme Edition plugin
• Fractal indicator

Depicted: Admiral Markets MT5 with MT5SE Add-on WTI CFD – Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

Here is the sequence of steps:

• Analysis: trade with the trend by using the moving average:
  1. Longs above the 100 ema close.
  2. Shorts below the 100 ema close.
• Entry method: breakout.
  1. Breakout with a candlestick close above the Keltner channel resistance for long setups.
  2. Breakout with a candlestick close below Keltner channel support for short setups.
• Stop loss:
  • Traders can use stop loss above or below the closest fractal, the 2nd candle low or high, or the nearest closed candle low or high.
  • New setups are available after the price retraces back into the Keltner channel.

• Trade management: use a trail stop loss and move to break even once the trade has reached at least a 1 to 1 reward to risk ratio.

• Exit method: aim at a recent top or bottom (using the same rule in filter). Or aim at weekly Pivot Points.

Depicted: Admiral Markets MT5 with MT5SE Add-on WTI CFD – Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

Depicted: Admiral Markets MT5 with MT5SE Add-on WTI CFD – Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

The most difficult part is perhaps the idea for filtering out setups, which tries to avoid setups that are too close to recent support or resistance.

Here is how traders can do it: 

• Use long-term moving averages:
  • Do not enter short setups if the price is above a long-term moving average.
  • Do not enter long setups if the price is above a short-term moving average.
• Use control + Y to add horizontal levels. Check the tops and bottoms of the last 2 time zones and place the horizontal trend lines there.
  • Make sure that the space between entry and top or bottom (reward potential) is not smaller than the stop loss size, which is entry versus stop loss placement (risk).

Depicted: Admiral Markets MT5 with MT5SE Add-on WTI CFD – Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

Once again, this is not a complete trading system, but just a combination of tools and indicators that demonstrate how traders could build a trading system. Always keep in mind that all of these ideas should be tested on a demo account first.

The Best Platform for Trading Oil / WTI CFD

The best trading platform for trading crude oil or WTI is arguably the MT5 Supreme Edition. The MetaTrader (MT) platform offers a charting platform that is easy to use and navigate. Traders can view the WTI instrument, and a wide range of other financial instruments, including Forex, CFDs, CFDs on commodities, and stock indices.

The Supreme Edition plugin from Admiral Markets offers a long list of extra indicators and tools that are not a standard part of the usual MetaTrader package. The additional features include, but are not limited to, the sentiment trader, the mini terminal, the trade terminal, the tick chart trader, the trading simulator, mini charts perfect for multiple time frame analysis, and an extra indicator package including Pivot Points and the Keltner Channel.

admiralmarkets

UK Oil & Gas share price: what to expect from annual results

Small cap oil firm UK Oil & Gas (UKOG) announces earnings next week, but there is little sign that production has reached a sustainable footing yet.

When is UKOG’s earnings date?

UKOG reports earnings on 28 June.

What does the City expect?

UK Oil & Gas (UKOG) suffered an operating loss of £3.7 million last year, while net debt stood at almost £9 million. The company is focused on securing more results from its Horse Hill project in the south of England. A recent pressure test was reported to be successful, the company said, with results better than previous tests earlier in the year. Production volumes from the Portland reservoir have now reached 20,500 barrels, with a production rate of 220 barrels per day (bpd).

Overall testing costs have now been offset by sales revenues, according to the company. Fresh drilling in coming months is expected to boost production in due course. The firm has also signalled its intent to make acquisitions overseas, though this has required a share placing which has diluted investors.

As noted by IG’s Oliver Smith, the company’s focus on acquiring new assets is odd, given that it is still far from producing profits on a sustainable footing. Drilling and test production across a range of assets is expected to take until the end of 2020, with little sign that its oft-mentioned ‘Gatwick Gusher’ is close to providing the level of output needed to restore UKOG’s finances.

UKOG falls into the ‘high risk, high reward’ category. The list of oil exploration firms that have disappeared without a trace is a long one. Everyone remembers the firms that have gone on to great success, or have been acquired by an oil major at a substantial premium to the share price. But small cap oil firms follow a crucial rule of trading and investing; most of the gains come from one or two firms, and the profits made here have to make up for the small losses incurred in the majority of the others.

Good traders know that, out of ten trades, only two or three need to be big winners, so long as the other seven or eight are only small losers. This is where risk management comes in, risking only a small amount of capital on each trade. The same principle applies to small cap oil exploration firms, and small cap miners too. A portfolio of ten such stocks could see two succeed, but eight record small losses.

UKOG could be one of those winners, although at present it has a long way to go before it sees sustainable production levels.

How to trade UKOG’s share price

Volatility in UKOG’s share price has risen over the past month, with the fourteen-day average true range (ATR) hitting 0.06, 16% of the current share price value. The overall downtrend in the shares seen since mid-2017 suggests that looking to sell the rallies is still an effective strategy.

UKOG share price: technical analysis

As noted above, UKOG has steadily lost ground since the middle of 2017. A rally in February to 2p hit trendline resistance from the 2017 peak, creating a lower high. Support has been found around 0.9p, with a break below this level representing a notably bearish development. A rebound above 1.3p might suggest that more near-term upside is on the way, targeting the 2p high from February.

Source: ProRealTime

UKOG still needs to prove itself

UKOG could turn out to be one of the great oil exploration firms of our time. However, it has yet to show a firm record of production growth. Investors have found it difficult to keep faith with the firm, as witnessed by the decline in the share price over the past two years (although part of this is down to dilution through share placings). The risks of investing in it are high, and traders will be looking to take advantage of the prevailing downtrend.

Chris Beauchamp | Chief Market Analyst, London | Wednesday 19 June 2019 18:10

IG Markets