Being a successful and profitable trader is not an easy task. There are many aspects and factors that you need to consider in order to determine whether you are going to be profitable from that stock or not. The economic climate is the deciding factor in the rise or fall of these stocks. Unlike stocks that remain the same and steady, cyclical stocks are more profitable, according to The Profits Manager. 

In our stock market courses in Ludhiana, we will teach you how these cyclical stocks are much more sensitive to facing economic ups or downs than defensive stocks. Basically, these stocks depict the consumers that buy products from companies during the time of economic boom and cut back during the recession period. The performance and sales of these stocks are very closely tied to the economic cycle. In general terms, buying these stocks is only profitable during economic growth rather than recession and downturns.

There are some characteristics of these cyclical stocks which will give you valuable insight about buying them or not : 

1. Industries: Some of the common industries with cyclical stocks include automobiles, airlines or luxuries. They prefer to buy these stocks because they tend to flourish even when there is disposable income. 

2. Volatile nature: Buying these stocks could be more volatile than buying the non-cyclical or defensive ones. You might have to face some fluctuations due to changes in economic aspects.

Cyclical stocks work according to the economy, which makes them vulnerable to some benefits as well as drawbacks. Some advantages are : 

• Growth Potential: When there is economic expansion, these cyclical stocks offer outstanding returns when the demand for their products surges even higher.

• Identification: All of the stocks are accompanied by the help of sectors and their linking to the economic activity. It becomes easier to identify the cyclical stocks.

• Strong earnings: When you learn about cyclical stocks in our stock market courses at Ludhiana, you will experience that whenever the economy booms, you are capable of making robust earnings.

Associated with the economy not only has its benefits but also drawbacks. The setbacks that you might experience are : 

1. Increase in risk: As compared to non-cyclical or defensive stocks, cyclical stocks have more potential to get exposed to substantial losses during downtimes. 

2. Market Timing: You cannot predict when the market is going to boom and when it is going to face a decline. So, making a successful attempt while timing the purchase could be very challenging.

3. Lower payouts: If you have invested in cyclical stocks, then during the period of expansion, you could reinvest in the profits. However, the payout dividends will be much lower than those of the defensive stocks. 

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Conclusion : 

Trading needs a complete and detailed understanding of several aspects. You can purchase different types of stock based on the rise or fall of the economy, and cyclical stocks also fall under the category of economy-based stocks. You will observe that their value only increases with the growth of the economy. But when there is a surge in the economy, you can make high profits from these stocks.