How to Predict the Stock Index (3 Steps)

Choose the indices that you would like to follow. Monitor the price levels and volume levels of each index to watch for breakouts. Determine the resistance and support levels of the index for the period of time appropriate to your trading time frame. The resistance level is determined as a maximum price level that has been reached three times or more but not exceeded during a given period of time. The support level is calculated in a similar way, but at the minimum price level. If the price of a security exceeds the resistance or support levels, it's called a 'breakout' and indicates the possible beginning of a trend.
Trade breakout levels accordingly for the index you're trying to predict. If a resistance level is breached, you may wish to buy an index fund or index exchange-traded fund (ETF) that provides broad exposure to that index. If the support level is breached significantly, you may want to short-sell one of those funds.
Protect your investment in an index fund by using stop-loss orders. Trends can persist for long periods of time, but historically, most of them encounter re-tracements or reversals. For example, the Nikkei 225 of Japan experienced a high of more than 20,000 in the year 2000. In 2009, it remained at the 10,000 level, although it managed to reach a high of approximately 18,000 in 2007. Even strong trends are prone to eventual reversals.