You should not enter the niche marketing business with your home business until you have asked some questions.
Engaging in research is the most appropriate method to find a profitable niche. Go on discussion boards to see what people are looking for. Use keyword research software to see what the most popular searches are on any given subject. To discover new trends and movements you must keep you ears open.
How do I know the niche I have found is profitable? You can tell if a niche is profitable in plenty of ways. Perhaps the niche you have found is good if the terms related to the niche seem to be searched regularly and that there aren't too many people competing for them on search engines like Google. This could be explained by the fact that the niche simply is not marketable. There will be heavy search volumes and a lot of competition for some niches. Although it could clearly be profitable, if your product or niche marketing effort is not top notch and efficiently promoted it might fail because of the high level of competition.
Niches with no one competing in them are obscure but they can be found. But then again, it can be because there is really no market or the information can be found for free on the web. Test your niche so you are convinced that it is good.
What do I do to test my niche correctly? You might pitch or create a hypothetical product and visit discussion boards and ask questions about it. The people that read your thread can be used to gauge exactly how people are responding to your idea by polling them if the internet marketing discussion boards will let you do that. A pre-launch will show you how people are responding before you launch a product. Test the waters with low cost or even free marketing solutions if you are thinking about promoting products through niche affiliate marketing programs.
What is the best way to make money with niche marketing? Because there really isn't a "best" way to promote to a niche, this is a difficult question. Some people will find that for their niche, budget and/or capabilities, a blog will be more profitable for their niche. For others, they might consider setting up a newsletter whereas for other niches, you might consider launching a small report or a full on e-book or video series. Making money using niche marketing and dominating niches is possible by using any one of a large variety of methods so to name one method as the best is extremely hard.
When done right, it is very easy to do niche marketing. Test your products properly and use a variety of methods to promote them and you should be halfway through conquering the niche marketing field in no time.