Investing in the stock market can be tough, really tough.
This is life and death we're talking about here because the decisions you make affect your retirement; whether you can afford to feed yourself and keep a roof over your head during the years when you'll be too old to work.
So making the right investment decisions is vital to each and every one of us.
The problem is, the stock market goes up, and then it goes down...
then it goes back up again, then it goes back down again.
This see-saw ride up and down can be nerve-racking for the best of us! We all like to see the market go up and none of us want to be caught with our pants down when the market takes a turn for the worse.
That's exactly what I want to talk about in this article today; how to know when the stock market has risen too high and is about to turn downwards.
Getting out of the stock market is a fine art as well as a science.
Some people call this "timing the market", but it doesn't have to be as wishy-washy as that.
There are certain scientific things you can do, certain indicators that you can watch out for that will give you a heads up and let you know when it may be time to take your money out of the market while things cool off.
Don't fall into the trap of falling in love with your stocks.
Just because the stock has risen tremendously over the last few months or even the last year, doesn't mean it can't drop out of the sky at a moments notice.
You have to be able to pull the trigger and sell your stocks as soon as you see that the market is starting to take a downturn.
We live in a cyclical capitalistic society.
The first thing economists learn when they start taking classes in college is about the business cycle of booms and busts, peaks and troughs, and how this affects everything.
What that means is you can be sure the stock market's going to fluctuate, it's perfectly normal for it to do so.
But that doesn't mean you have to lose money because of it! So here are a few indicators to look for that may tell you the market has risen too high...
The blue chip stock averages keep hitting new highs but the secondary stock markets, that is the smaller stock markets like the NASDAQ composite and value line, are stalling.
This may be an indicator that the market is about to turn.
Next watch the Dow Jones industrial average to see if it has stopped rising.
Many times the overall average stops rising but certain sectors within it keep rising, this may be an indicator that the market is about to turn.
Finally watch for the number of New York Stock Exchange members that are selling short.
Members tend to be experienced professional investors and if they start selling short it may be an indicator that the market is about to turn down.
However you determined that the stock market is about to turn for the worse, the most important thing is to be able to pull the trigger and sell your stocks within a moments notice.
Many people have trouble doing this because they get attached to their stocks as I've already mentioned.
But as long as you can do this, you stand a good chance of saving your skin no matter what.