Curious about what’s happening in the basic materials sector? On Friday, February 10th, this sector of the U.S. stock market jumped up by over 1.5 percent, outpacing the rest of the market by a huge margin. The next closest major sector behind basic materials in terms of growth was the energy sector, which increased by 0.93 percent. There is a way that you can profit from this sudden, renewed interest in commodities. This blog post will act as a brief guide to creating a profit in the commodities and basic materials sector.
Your first step is to look at the underlying causes of why the sector did what it did. In the basic materials sector, where several different types of commodities are included, this is extremely important. For example, was steel at a higher level of demand than usual, or did prices go up because of some other reason, such as an unusual extra profit margin across the board during earnings season? These are both very specific examples, but they can be applied in a number of different ways. The bottom line is, if you understand why a price jump in basic materials companies has occurred, you can use that knowledge in different markets. Once you apply short term technical indicators to the reasoning behind the move and you are able to successfully predict where prices are headed, you will be ahead of the game.
That leads us to step two…
Find the Best Market
The stock market is a great place to make money, but it’s not the best place for all people to put their money. As a general rule, those with $50,000 or more in expendable cash should be in the stock market. There’s potential for profits with less than this, but your ability to actively trade is severely diminished because of current day trading regulations. These might change in the future, but if the past has been any indicator, they will only get stricter. For this reason, we suggest trading in the binary options or CFD market. There is still a lot of risk in these markets (there’s risk in any type of trading!), but they have a lower barrier to entry. In many cases, you can start trading with as little as $250.
However, the best market for you to make money in will really depend on you. Look at the major markets, see where your expertise and background place you, and then go from there. In this example, the binary options market might not be the best place as most brokers do not give you a lot of access to commodities or the smaller companies that focus on basic materials. However, some do, and many brokers that allow binary options also allow contract for difference trading, so there’s a lot of overlap here.
Next, find a strong broker. You want your broker to be reputable, legally allowed to accept traders from your region of the world, and have an acceptable banking policy for your needs. Create an account with them, and start gaining some experience. If your broker of choice has a demo account, use that so you can gain experience with the trading platform in a risk free setting.
Focus on Long Term Results
Trading is a long term endeavor. Yes, trades can last as little as 60 seconds, especially in the binary options world, but trading in general is a long term thing. If you are going to trade the basic materials market, you need to have a long term vision, all while successfully looking at the technical indicators of the commodities and the companies that you focus on. Long term profits are the result of many successful short term trades.