Learn The Signs Of A Market Top

I would say around 90% or more of all traders and investors, ultimately lose money trading the various markets. What generally happens is that most traders buy a lot of stocks, at or near, market tops, and sell their stocks, at or near, market bottoms. This is simply a recipe for financial disaster. It is important to note that 75% or more, of all stocks follow the general market trend.

What is really amazing, is that most mutual fund managers do not have a clue, when it comes to understanding clear warning signs of an impending stock market correction, or possible major bear market. There is no way of knowing just how far a market can go down, before it finally hits the bottom.

Early in 2000, there were signs, signs, everywhere a sign, that the stock market was in big trouble. Most mutual fund managers, not understanding these clear warning signs, lost enormous amounts of money for their clients. I was completely out of the stock market, and in cash, months before the market really started to crash. I implemented proper price and volume analysis, along with knowing, and acting upon other clear warning signs. The NASDAQ ultimately fell 78%, from its peak in March, 2000, until the bottom finally happened in October, 2002.

Without getting into detail, here are some of the warning signs that a stock market top is likely imminent.

No individual stock, or the stock market itself goes up forever. Ultimately, at the very least, there will be a correction. If, after an extended uptrend in the stock market, it goes up an incredible amount, in a relatively short period of time, watch out. This is called a climax run, and is a strong warning sign of a coming market top.

Another solid sign of a market top is when the stock market has 5 or 6 distribution days in a 2-4 week time span. A very basic definition of a distribution day, would be a down day in the market on heavier than normal volume.

The leaders of a stock market uptrend are a key force in keeping an uptrend going. Once you see leaders of the market start to falter, this is another key warning sign of trouble in the overall market.

Other warning signs to watch for include, a trend of rising interest rates by the Fed, and a slowdown in key areas of the economy.

Always be on the watch for possible signs of a market top. It can save you a lot of money and frustration.

By: Gary E Kerkow

Article Directory: http://www.articledashboard.com

Hi, I'm Gary E Kerkow, founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. I have over 20 years of trading experience including stocks, futures and options. I implement the strategies, methods, and psychology of the world's best traders and investors. This includes Jesse Livermore, William J O'Neil and others. Visit my website at www.tradingmarkets4u.com