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If you are new to online stock trade then you may have already discovered that all the hype and fancy ads do not seem to work as well as they promised. What you are about to read works. Period! I know because I have tried and tested all that I talk about. My favorite strategy in online stock trade is using inverse relationships with stocks.
I have profited greatly from the mining stocks, particularly gold stocks. I have been fond of trading stocks such as Barrick Gold (ABX), Newmont Mining (NEM) and Yamana Gold (AUY). There is often a great deal of volatility in the gold prices and this makes for great buying and selling opportunities with these stocks. In general, when U.S. interest rates rise, foreign investors buy more U.S. bonds, and that requires them to buy more dollars, which raises the value of the dollar versus other currencies. Gold prices are harder to predict, but in general, when the dollar goes up, gold prices go down. As you learn what to look for in terms of the weakening and strengthening of gold prices you will be better suited to profit off this great opportunity. Similar to the oil/airline relationship, the dollar/gold play is a readily available move to the trader that learns how and when to move on it. I advise waiting until 10:30 on this trade as well but that time line is not as important as it is when it comes to oil/airline stocks for reasons previously mentioned. Before I move on I want to quickly address the other side of the gold play. The dollar impacts companies that produce abroad and sell in the United States. When the dollar is strong, there will usually be a positive move for companies such as Toyota (TM). Companies that specialize in the healthcare industry, particularly drug companies are negatively impacted by this. I do not find this inverse relationship to be very playable for a day trade but it is something that can be taken advantage of for a long swing trade, especially if there are factors in play that seem to indicate that the dollar will be remaining strong or weak.
In online stock trade there are many other inverse relationships that you can work with that are very dependable plays and can be effectively and profitably traded in the 1-5 day range. Take a look at companies such as Hershey and how it moves relative to cocoa prices; Starbucks and coffee prices; Freeport-McMoRan Copper & Gold (FCX) and the price of copper; wheat prices and General Mills (GM) just to name a few. Remember, find a company that has as its main cost a commodity that is inherently fluctuating. Trade on the fluctuation and if you really want to profit nicely learn what the influencing factors are on that commodity. One more thing to remember when you trade on any of the commodity driven stocks: there are certain companies that have prices locked in for the extent of that contract with the commodity. Obviously, these stocks are not going to come into play when we are looking to capitalize on these inverse relationships. One example (as of the writing of this book) is Southwest Airlines (LUV), they have a contract locked in at somewhere around the $40 a barrel range. If and when this contract expires, they are become open prey for this move.