In the following article, we will discuss everything there is to know about natural gas (NG)trading strategies, from why you should invest in a natural gas company to the best methods and tips for trading. We will also go over whether trading oil is a wise decision.
Oil and Natural Gas Corp statistics
Oil and Natural Gas Corporation Limited (ONGC) is the largest Indian company producing crude oil and natural gas. The corporation develops, explores, and produces value-added products in addition to natural gas and crude oil. Some of the major sectors this company operates in are production, exploration, as well as marketing, and refining.
The firm operates offshore and onshore in India, extending beyond. It also engages in the acquisition of gas and oil acreages beyond the Indian subcontinent and takes part in the development, production, and exploration as well as downstream activities like marketing and refining of petrochemicals, helicopter services, petroleum products, power generation, pipeline transportation, and special economic zone (SEZ) development.
The business is the biggest supplier of oil and natural gas in the nation. More than 80% of the natural gas inventory and around 70% of the crude oil used in India were generated by ONGC. According to Statista, Oil and Natural Gas Corporation recorded a sales income of roughly 679 billion Indian rupees for the fiscal year 2021.
Why should one invest in natural gas?
Natural gas is a highly demanded resource since it is used for several purposes in homes and industries worldwide. For instance, more than half of the houses in the USA utilize it for cooking in the kitchen. Natural gas is applied as an alternative to diesel and is used to power generators as well. Furthermore, it plays a significant role in transportation since it is considered the cheapest fuel option in many countries.
Natural gas is in great demand and most likely will remain so for a very long time. As a result, traders should anticipate continued strong demand for the commodity as long as many sectors have energy requirements and as long as homes across the globe utilize gas for cooking and warmth. Due to it, trading natural gas is one of the appropriate investment choices for those who try to avoid taking on significant risks.
Trading natural gas allows enjoying a hedge on a declining US currency and rising inflation. Since the commodity is valued in US dollars, the health of the United States economy may affect its cost. Inflation concerns may also help drive up the commodity’s value.
What is trading natural gas futures?
Natural gas futures are contracts that obligate the market participant to acquire a particular amount of the commodity at a future date and cost. Dates for deliveries are often established for the 15th day of the following month. Futures are valued in millions of British thermal units (BTUs), where one BTU would be the energy required to raise one pound of water by one ℉.
Note! Trading natural gas futures is available on the Intercontinental Exchange (ICE), Multi Commodity Exchange of India Ltd (MCX), and NYMEX.
Best strategies and tips for trading natural gas
There are several techniques to trade natural gas adopted by many experienced investors and traders. Keep reading to find the top three below.
It is a type of trading when trades are opened and closed on the same day. This is one of the most common strategies for trading natural gas since it enables receiving additional income for the day at its end. Buying natural gas during an upswing and selling it during a decline are the two most common day trading strategies.
You may readily see the recent natural gas trends if you keep an eye out for lower lows, lower highs, higher highs, and higher lows. The price creates a series of higher highs and higher lows when the trend is upward. In contrast, a series of lower highs and lower lows show a decrease in price (downtrend).
Range trading strategy
Since many individuals apply the range trading strategy to open and close their trades during the same day, this technique is comparable to day trading. Range trading can easily be defined as buying whenever natural gas hits the lower range level and selling when it reaches the higher range resistance.
Note! The market is most likely ranging if the chart shows no higher highs or lower lows.
It’s also crucial that the market isn’t trending while range trading. To assess trends’ strength (or lack), you may also utilize technical indicators like the Average Directional Movement Index (ADX).
It is quite common among experienced traders. Breakout trading is a strategy in which it is supposed to open trades as soon as the commodity price breaks above or below a previously formed level. Stop-loss is set just beneath the broken resistance level or slightly above the broken support line.
Should I trade oil?
Crude oil trading is also a smart option since, due to its unique position in the global political and economic systems, it gives tremendous potential to earn in practically all market circumstances. Additionally, the volatility of the energy industry has increased significantly in recent times, assuring strong trends that may deliver good income for both long-term and short-term methods, such as swing trading.
Here are a few reasons why you should consider oil futures:
- Liquidity: It is one of the most critical factors contributing to the popularity of crude oil. It is one of the most highly traded commodities, and its futures are among the most liquid on the market.
- Potential earnings: Oil futures might be highly profitable investing options. Experienced traders can earn up to a few thousand dollars per trade while putting up far less capital than they would on the stock market. However, the risks are also high, as the oil price is volatile and is influenced by various factors, including political actions and the time of year.
- Leverage: Oil futures provide traders with leverage. This indicates that it is feasible to purchase using broker-loaned funds. Additionally, because the margin requirements are so minimal, a trader may make ten to twenty times more trades with a lot less cash.
- High demand: Oil has become an irreplaceable asset with a highly constrained supply. This implies that investors and traders may reap the benefits of the scenario by assuming that prices will most likely rise in the absence of technological advances eliminating every industry’s need for this commodity. However, even if this were to occur, businesses couldn’t just abandon their vast stock of ships, automobiles, operational vehicles, and construction machinery and replace them immediately.
Hundreds and thousands of individuals around the globe earn extra income by investing in oil and natural gas. However, when applying any strategy to trade these commodities, remember that trading is associated with risks, so exercising caution is necessary to avoid losing your investment. Also, choose a reliable broker and take into account possible commissions.