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Rate Hike Possible Later this Year

February 23, 2015 •

You can Trade the Rate HikeNew data out of the U.S. economy has investors smiling, but it is also setting the stage for a Fed rate hike later on in the year. Jobs keep growing within the U.S., and this is a very good thing for the economy. It shows normal growth, according to some economists, and that is a sign that the Fed can once again safely raise interest rates, and start creating more revenue for the federal government on this front.

This is a normal cycle within a healthy economy, but it does imply that there will be slow down in stock market growth once rates do go up. This, again, is normal, but it will become a bit more expensive for businesses to borrow money and grow, and this means that the record growth that the 2014 year so will probably not happen again in 2015. It doesn’t mean that growth will not happen, it just means that it might not be as dramatic in nature.

There is no need to worry about this. Growth of any sort is good for long term investors, and it can be even better for traders, too. A trading approach that takes direction into account and not the momentum of that direction can prove to be a very profitable strategy, especially if you are trading over the short term. For example, we know that the overall direction of the market is upward, so buying a bunch of index funds and holding them for 30 years will inevitably create a profit for you. If history is any indicator, you will gain about 3 percent per year on average. After 30 years, that’s a huge amount of growth. However, by focusing on a shorter term, you can make even more money because you don’t have to worry as much about the downward motion that will creep into your holdings–sometimes for a few years at a time. 3 percent per year does not mean 3 percent every year. It might mean 10 percent one year, a loss of 5 percent the next, a 1 percent growth after that, and so on.

There are many ways to avoid this, but one of the most accessible is through binary option trading. For example, the markets keep climbing now, but when the Fed raises rates later on this year, the growth will probably turn into a short term loss. By establishing trades so that you can profit off of the drop through binary put options, you can still create wealth for yourself even when the market is doing the exact opposite for everyone else. In other words, trading allows you to profit regardless of what the market does. Binaries are just the cheapest and simplest way to work this angle to your advantage.

During the last three months, 336,000 jobs have been added per month on average, with 257,000 added in January. This is a great number, and it shows strength as companies gain more revenue, but growth doesn’t happen every month and eventually, the government will decide that the country is now healthy enough to start paying more for that growth. By profiting when the market is going up before this, you are doing what everyone else is doing, by profiting during rate hikes, you are joining the select few that know how to make the markets work for them regardless of what is happening. And the good news is that with short term trades and locked in profit rates, the drops in price can be tiny and you will still make big profits when you use binary options.

Categories: Starting Out
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