Gone are the days when it was relatively easy to see where the oil market was headed. Up until July the trend was definitively upward. Then it was definitively downward.
Now the experts say that prices look like they'll swing in a tighter range for awhile, which makes it more difficult to place a bet that oil will rise or fall and then just walk away for a few months.
But on a day-to-day or even minute-to-minute basis, the market can be just as volatile as ever. Here's your opportunity to make - or lose - a lot of money in a short time.
Average investors can buy oil contracts on the New York Mercantile Exchange through hundreds of Web sites targeting the mom and pop investor. What's more, brokerages will lend you the money to trade - with a minimum investment of $1,000 or $1,500. But tread carefully. You can lose half your investment on a dollar swing in the price of oil.
The key is taking advantage of the large swings in the market, and to do that you have to make several trades a day. "You should be able to make money in a $10 range, that's huge," said Andrew Lebow, a Broker at Man Financial in New York. "You just have to be a little more nimble."
2. But not too active
One of the biggest mistakes day traders make is simply trading too much, said Phil Flynn, a senior market analyst at Alaron Trading in Chicago.
"You have a tendency to kill yourself because you're going back and forth several times," said Flynn, noting that each trade comes not only with a risk of betting the wrong way but also a commission fee. For the contracts traded, most of the Web sites will charge about $7 a trade. (To find some of the sites search for "commodities trading" on the Web).
Flynn suggested setting a limit on not only the dollar amount you're willing to lose, but on the number of trades you're willing to make in a day.
He said the limit will be different for everybody and can even be flexible depending on market conditions, but generally thought something more along the lines of 1 to 5 was better than, say, 20 or 70.
3. Watch natural gas
As in other areas of the commodity market, energy pricese tend to track each other, trending up or down as a group. One of the biggest actively traded energy contracts aside from crude oil is natural gas.
Historically, a barrel of crude has been about seven times more expensive than the price for a BTU of natural gas, said Stephen Schork, a day trader who also is president at the Schork Report, an industry newsletter.
When that ratio gets way out of line, as it is now, he said that "either crude is too expensive, natural gas is too cheap, or both."
4. Geek out
Since oil looks likely to be range-bound for awhile, futures probably will be more affected by "technical factors" like trading volume and short-term price swings.
The thing is, technical trading isn't the type of thing generally offered in college. Jun Wy, an investment adviser who day trades and also works for the online brokerage Direct Trade Futures, said he studied computer networking in college.
Wy said he's self-taught in the art (science?) of technical trading, having gleaned most of his knowledge from books, trading forums and online chat rooms.
5. Be a newshound
Whether oil fluctuates $25 in a year or stays within a narrow band, politics will always move prices.
Among the global events that could send prices higher: The collapse of the peace deal between Israel and Hezbollah; tighter sanctions imposed on Iran; sabotage attacks in Nigeria; a pickup in the war in Iraq; further nuclear tests from North Korea.
An astute reading of the news can tip you off to impending events, and buying (or selling) a day before can net you big money, people who trade for themselves say.
"With just about everything that happens people turn their head and say Where's oil?" said Eric Bolling, an independent energy trader who has a seat on the New York Mercantile Exchange. "Everything is tied to oil."