Using a business index can help you make more profitable trades

A business index for those unsure about the nature of it, it's nothing more than a compilation of data to help investors or economists predict future movements of the market or economy.

Business indexThese indexes may be based on a specific year in the past and by comparing numbers, show a rising economy or segment, one that's stagnant or one that's falling. For instance, if you identified that consumer spending was high in a specific year and the S&P 500 soared, when you see the same factors in another year, you'd want to invest in S&P 500 futures or options to buy.

A business index is just one type of trading tool

The business index doesn’t have to be used to master the commodities market or stock market, it's simply a tool and one of many. While some of these indices already exist, such as the consumer confidence index, you can actually create your own by plotting the yearly, monthly or quarterly information and comparing it to the price movement of a stock, commodity or other investment. If you see a correlation that helps you make a profitable exchange, it becomes one of the indexes you'll probably use frequently. Most of the time, these indices are already tracked and ready for you to learn how to use them. 

Learning the correlations is the key to success

Knowing where to find the various statistics and learning how to use tools that plot the progression is important, but unless you know how to use that information for profit, it's just interesting information. Increased discretionary consumer spending is pretty easy to understand. It means the economy is growing. 

The consumer confidence index, another indicator of the economy, comes from a survey by the Conference Board sends surveys to 5,000 families. They only ask five questions. They ask the participants to respond by giving a “positive,” “negative” or “neutral” in five areas. They include business index conditions now and in the following six months, current employment conditions now and for the next six months and total income for the family over the next six months. 

The results are compared with the benchmark, 1985. When this indicator is high, it can move the stock market in positive ways. Remember, the market doesn't always move because of what's true, but what people believe is true.

There are many different indices to consider 

From the Business Outlook Survey to the Jobless Claims report, there are a wealth of business indices you can use for a wide variety of investing. Whether you're investing in the stock market, currency pairs or specific commodities, these reports show the health of the economy and can help you make a wiser, more profitable decision. If you use these reports, you should use several. 

One business index will provide help but won't provide the entire picture. For instance, the Consumer Credit Report shows an increase or decrease in debt for the nation. That might be alarming unless you found several other indices showed the increased debt was combined with other indices that showed a growing economy and optimism. Many brokerage sites not only have the updated indices, they also have to train on the best way to use the information. 

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