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.
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.
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.
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.
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.
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 holds position around 1.0850 due to bullish bias
![EUR/USD holds position around 1.0850 due to bullish bias](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/money-59004818_XtraSmall.jpg)
EUR/USD halts its seven-day winning streak, trading around 1.0830 during the early Monday. The renewed demand for the US Dollar puts pressure on the pair. However, the decline in the US Treasury yields could limit the upside of the Greenback and put pressure on the pair.
GBP/USD loses traction near 1.2800 amid modest recovery of US Dollar
![GBP/USD loses traction near 1.2800 amid modest recovery of US Dollar](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/british-banknotes-14144912_XtraSmall.jpg)
GBP/USD trades on a softer note near 1.2805, snapping the seven-day winning streak during the early Monday. The recovery of the Greenback drags the major pair lower. However, the downside for the pair might be limited amid the rising bet that the Federal Reserve will cut the interest rate in the third quarter.
Gold down but not out, as upside bias stays intact
![Gold down but not out, as upside bias stays intact](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/stack-of-golden-bars-in-the-bank-vault-60756080_XtraSmall.jpg)
Gold price is correcting lower from near six-week highs of $2,393 set on Friday, despite a broadly subdued US Dollar. A modest recovery in the US Treasury bond yields and China’s pause on Gold buying for the second consecutive month in June.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Bitcoin falls below $55,000 level
![Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Bitcoin falls below $55,000 level](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/cryptocurrenciesusd_XtraSmall.jpg)
Bitcoin dropped below $56,552 on Sunday, disrupting market structure and signaling a bearish outlook. Ethereum and Ripple also revisited their support levels, slipping below critical thresholds, indicating a possible downtrend for these assets in the days ahead.
French election: It’s all over for Marine Le Pen, but the left weighs on the Euro
![French election: It’s all over for Marine Le Pen, but the left weighs on the Euro](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/France/eiffel-tower-during-spring-time-in-paris-france-40915096_XtraSmall.jpg)
The deciding vote in the French Parliamentary elections closed this evening, and the exit poll suggests a shock result. The winning party is the left alliance, the popular front, which was pulled together to try and keep Le Pen’s far right National Rally party out of power.
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