With the poor returns on capital that are available in these days of low interest rates, it is no surprise that more people are looking to trading to increase their wealth. One of the most effective markets for doing so is the futures, or commodities, market, mainly because it provides an excellent opportunity to multiply or leverage the effectiveness of your outlay.

Futures contracts are standardized for quality and quantity, which allows them to be traded readily. The standard contracts for crude oil are for 1000 barrels, which is about 42,000 gallons, and the most common standard is the WTI, also called light sweet crude oil, with Brent crude being an alternative found more in the UK market.

While this is the traditional standard size, or “lot”, for oil, you will find dealers that allow you to trade on smaller lots. In addition, the leverage mentioned in the first paragraph means that you only have to find about one dollar for each $100 of the contract – the ratio is typically 1:100. This is called “trading on margin” – effectively you are borrowing – and liable for – the rest of the money. But in this way even a full lot of 1000 barrels can be contracted for about $1000.

However, this certainly does not mean that you should be trading oil if you only have this minimal amount. You need to understand that the price can go up or down, and your account will be charged the full difference. If your contract is losing money, it can be closed by the dealer to protect his business if you do not have sufficient funds to cover the potential loss.

As you can see, the potential profits can be enormous as long as you trade in the right direction, and this is what makes trading oil and other commodities so attractive, and worth learning about. If the price of crude oil goes up just two dollars a barrel, from $100 to $102 say, then you have made a total of $2000.

After learning more about how to identify winning trades, you need to find a commodities broker and set up an account. The broker will ask several questions about your net worth, your income, and your knowledge of trading futures, as it is in both your interests that you are financially sound and considered competent to make these trades.

When trading, you need to take care of your capital, and as a general guideline it is often considered that you should not risk losing more than 2% of the total on any individual trade. The amount you actually risk depends on the price that you are prepared to let the contract go against you, usually called the stop loss position, before you cut your losses and close the trade. In fact, you should work out this price before placing a trade, and use it to decide how large a contract you can safely take out. 2% may not sound like much, but when you have several bad trades in a row if you lose any more than that on each you will find it very difficult to even recover your original stake, let alone make a profit.