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Traders and investors in the Indian equity markets have been enjoying watching as prices have been breaking to all-time highs. Of course the big question in everyone’s mind is where will this bull run end and is there anything I can do to protect my capital when it does? While no one can predict exactly where this price movement will reverse since there is no supply level above to signal this, there are some tools that traders can use to identify when the bullish pressure has subsided and therefore marked the time for profit taking in your portfolio.

India Markets

One of the most common methods is to use a moving average on your chart. The average summarizes the past trend and momentum and when prices start breaking down below it, you have likely seen the end of your trend. There are two problems with using moving averages. First, they are lagging and give very late signals. Secondly, since they are lagging, you are likely to have given back some profits you have made in the previous trend before you exit.

India Markets

To reduce the lag and hopefully exit with more profits, many traders will look to advanced technical analysis tools such as the Fibonacci Extension tool. This uses the Fibonacci numerical sequence to project probable price points in the future where price may turn. The problem is that the price may only use these areas as pausing points rather than reversal areas and you could be exiting prematurely.

India Markets

Price is usually the best indicator. Using the definition of a trend can help you identify when the trend is reversing and action is needed on longer term trades and positions.

India Markets

Again you can see that using this method will not necessarily get you out with the greatest profit but it will protect your money against a large drawdown. Perhaps a combination of the above methods would be a better plan for your trading and investing. To learn more on how to identify market turning points and timing these turns, join us at one of our courses at Online Trading Academy today.

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Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.

Editors’ Picks

EUR/USD touches five-month low on growing expectations that ECB will ease before Fed

EUR/USD touches five-month low on growing expectations that ECB will ease before Fed

EUR/USD managed to counter a poor start of the week and reverse course despite the European currency slipping back to the 1.0600 key support against the US Dollar, or five-month lows.

EUR/USD News

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.

GBP/USD News

USD/JPY goes on a roller-coaster ride prompted by geopolitical risk

USD/JPY goes on a roller-coaster ride prompted by geopolitical risk

USD/JPY whipsaws lower and then higher on alternating risk-on risk-off caused by Middle East tensions. Governor Ueda talks about defending the Yen from further weakness and currency-induced imported inflation. USD/JPY price chart shows bearish Hanging Man forming, boding ill for future price action. 

USD/JPY News

Editors’ Picks

AUD/USD remains on the defensive below 0.6450, investors await Australian CPI data

AUD/USD remains on the defensive below 0.6450, investors await Australian CPI data

AUD/USD remains on the defensive near 0.6420 during the early Asian session on Monday. The Federal Reserve media blackout went into effect at midnight Friday. Nonetheless, the US central bank has delivered hawkish messages in recent weeks and markets expect the first cut in September. 

AUD/USD News

EUR/USD touches five-month low on growing expectations that ECB will ease before Fed

EUR/USD touches five-month low on growing expectations that ECB will ease before Fed

EUR/USD managed to counter a poor start of the week and reverse course despite the European currency slipping back to the 1.0600 key support against the US Dollar, or five-month lows.

EUR/USD News

Gold: Will geopolitics continue to drive XAU/USD?

Gold: Will geopolitics continue to drive XAU/USD?

Gold price fluctuated in a relatively narrow range this week following the record-setting rally. Investors will continue to pay close attention to headlines surrounding the Iran-Israel conflict and scrutinize key macroeconomic data releases from the US this week.

Gold News

A breakout or significant price movement may be imminent for Ripple’s token

A breakout or significant price movement may be imminent for Ripple’s token

Ripple has been range-bound for a while, with token holders patiently holding as the ecosystem contended against the US Securities and Exchange Commission. As per a recent report, the payments token’s price has been stuck below $0.50, failing to breach key resistance levels.

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Week ahead: US GDP and BoJ decision on top of this week’s agenda

Week ahead: US GDP and BoJ decision on top of this week’s agenda

US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap. Earnings season heats up as tech giants report.

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