Compared to the rest of the year thus far crude had a relatively mild week in trading. While crude oil futures dipped toward the $96 handle, volume was relatively light. Goldman Sachs reversed an earlier in the month call for lower crude prices and is now calling for $115 a barrel, while Morgan Stanley stay relatively bearish. The fact of the matter is the only guys who know where oil is going are the ones who are buying it, not the brokerage houses who are for the most part wrong. The fact of the matter is that oil over the long term is a supply and demand business. The fact still remain there is no more demand now than there was 2 years ago. And while everyone says the economy is improving, over road mileage in the US is still reported as meager. So if the trucks are not moving then where is the demand? Economic reports out of China show things slowing, reports in the US are reversing trend and heading lower. This week was an exciting week for exploration and science as new oil fields have been discovered in south west Texas. This too will in turn lessen our dependency on oil over the next decades. As these new facilities come on line energy will become less volatile but until then energy will remain the main news point for years to come. Below are a couple of ideas on how to stay safe when playing in this volatile market. Trading the light sweet crude market can make or break a small trader in a matter of seconds. For all of you that have experienced the thrill of victory or the agony of defeat you know what I am talking about. So as a small trader competing in the world of these energy Goliaths I have come up with some things to think about before clicking that platform button. Some of them are obvious, some not so much, but what they do when used together, with patience offer a higher probability of a winning trade than not considering them. To start off let's set some basic rules: 1) Understand your risk tolerance, if you go into panic when you enter into a trade, crude may not be for you. 2) People like us are a small fish in a very big pond. So if you have an account that you emptied you piggy bank right down to the last nickel to begin trading, than crude may not be for you as the players in this market are well financed and can move markets against you in seconds. 3) Keeping rule two in mind, you make your money when you buy not when you sell, and the inverse for short players. Some things you should keep in mind when pondering entering into a position. The old saying "the trend is your friend" may be over used but totally but rings true especially crude as it is so tied to currencies. Go to your daily chart and set the long term trend, after that I use the 15 minute chart to establish the intraday move with-in the overall trend. I found candles the clearest indicators of total market activity, The 15 minute allows you enough time to see what happens, allowing for the smaller amount of capital one may be trading. We want to buy as close to support as you can and sell as close to resistance as you can, where you enter depends on your risk tolerance, always setting stops above or below those points. This will give you the minimal risk exposure and also keep you in the game if things don’t go your way. The last thing to talk about for this part is trading the Wednesday inventory number. It makes sense that most of you will pay attention to the crude inventory number when trading crude. The market will only act initially to that number; this is usually a head fake in the opposite direction it intends to go. The real number you are looking for is the gasoline and diesel inventories as this will show a direct demand for refined products and is a more direct indication of what the economy is doing. These numbers also serve as a great indicator for other indices also. More fuel being used more people traveling, more products being shipped; well you get the trickle up from there. For us small guys the best way to play this number is not to. However, as traders we are going to-so here is the simple and fastest way to make a quick buck. If you think the move after the number will be bullish place a stop order above the current market price and if bearish, place a stop order below. By doing this takes all the guessing out of the market. If you are right in your order placement then the market will take you with it, if you are wrong then you miss the trade and the market moves without you, no harm done as you are not in the trade. Always remember that this is a fast trade in a fast market so when the trading Gods hand you a profit take it as those who giveth may also taketh away. While these tips have worked in the past, it is your order placement, judgment and willingness to take a quick profit or loss that will keep you in the game, Always remember we are swimming with sharks and it is easier to come back from a small loss than to put yourself in a position of hoping the trade will work. Capital preservation is the bottom line to successful trading. And any profit is a good profit, don’t sit there telling yourself you could have made more, it could have just as easily gone the other way turning a good trade into a disaster. Crude trading range has been in the 94-104 range with intermediate support at the 96 level and resistance at 102. Image source of Kuwait's Al Burqan Oil Field, the world's second largest oil field: Wikipedia

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