The Dotcom bubble in the 1990s, the housing bubble and credit crisis in 2007-2009. Every trader wishes they could have known exactly when these bubbles were going to burst.

Going forward, what trading tools can help predict the next speculative boom and bust?

Bubble Basics

To clarify, an economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is a “trade in high volumes at prices that are considerably at variance with intrinsic values.” It could also be described as a situation in which asset prices appear to be based on implausible or inconsistent views about the future.

Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst.

Bubbles go up beyond all sense and come crashing down with violence. Bubbles are invisible to most while they inflate and are not obvious when they collapse. Everyone claims to have seen them after the fact.

Trading Technologies to Predict the Next Bust

So can traders get out before a market collapses? While trying to pick market tops is a fool’s game, there are ways to recognize significant trend changes. VantagePoint’s Predicted Moving Average (PMA) tool combines actual data and forecasted data to give traders a two-day jump on the market.

This can be a huge advantage when a bubble bursts and the markets have a precipitous decline. Think about the violent moves of the NASDAQ in the 1990s.

Don’t become the victim of the next bubble burst.