The thing about a stock-market crash is that there is no way to predict it, or is there? What signs do you look for prior to a stock-market crash? Many look at the way in which analysts and prominent investors all turn bullish even if many have held bearish views in recent times. What makes you sit up and take notice?
Again, this is where your stop loss limits should kick in. However, if you use this strategy you need to sell without giving it a second though as/when your limits are hit.
Many market professionals claim that they could predict stock market crash but only few of them could actually do it. We even don`t know whether they predicted it accidentaly or through in depth analysis. It is also extremely difficult to define the signs of upcoming stock market crash in advance. Most of analysts make their decisions based on changes in important fundamental data, such as job claims or economy growth. At the same time, the greatest thing in all this is that if you are an active daytrader or at least a swing trader, you should not worry about it. The main advantage of active daytrader is unique flexibility allowing to trade in both short and long directions. Each day you start with no positions, so you can just evaluate the current situation properly and act respectively. Even if you are a swing trader, still you will be able to find interesting setups and trading opportunites. Even if the whole market is crashing, there would be stocks stronger than the other due to the fundamental reasons while large institutional investors would look for such stocks to relocate their assets it tought times. Thus, there is no need to worry about upcoming stock market crash unless you are an investment fund manager with huge long position.
