Stock Market Prediction

 

Stock Market Prediction is a risky venture. Knowledgeable investors base their predictions either on the basis of Fundamental Analysis , or Technical Analysis , or both. But most of the investors rely on the tips given by the experts for Stock Market Predictions .

Stock Market is the market for securities where organized issuance and trading of Stocks takes place either through exchanges or over-the-counter in electronic or physical form. It plays an important role in channelizing capital from the investors to the business houses, which consequently leads to the availability of funds for business expansion.

Determination of stock price considers that market is supreme and it discounts everything (economical, political and all related factors). It presumes that all the investors behave rationally and the value of the asset is estimated based on future expectations. Hence, with every new information, the future expectation of the market is liable to change and consequently the stock prices . As the new information is erratic in nature so it influences the price in a random way.

Stock Market Investments are subjected to market risks and the returns are variable in nature because it is an uncertain existence. Hence Stock Market Prediction is not also a guaranteed one. It is based on certain analyses namely

•  Fundamental Analysis

•  Technical Analysis

Fundamental Analysis looks into relevant data (cash flow, return on assets, history of profits, etc.) associated with the company, which could have an effect on the value and price of the stock. It tries to measure the intrinsic value of a company’s stock.

Technical Analysis tries to evaluate the future trend of stock prices by using various statistical tools, charts, etc. Technical analysts focus on the historical price movement of a stock.

Stock Market Prediction is not homogeneous in nature and differs from investor-to-investor in accordance with the investing/trading style. Some are investors and some are traders. Investors’ view to the market is generally long in nature and takes delivery of the stock but the traders try to profit from minor discrepancies in the stock prices.

Broadly, Stock Market Predictions are made based on the following two types of investments: –

(1) Traditional Investment

Buy or sell of securities for holding purposes with a view of medium and long-term perspective. They basically rely on efficient fundamental analysis of the stock they are taking position on. The investors falling into this type are known as Portfolio Managers .

(2) Trading or Speculation

Traders continuously have a watch on the market during the trading hours and the moment they find any opportunity arising they pounce on it for scalping the profit out. These types of trading are highly risky and are not considered as traditional investments because of their higher risk of loss than average. But it should be remembered that Speculation is no gambling because here the investors invest through informed decisions and the outcomes are not random in nature. Speculators generally rely on the technical analysis. Speculation supplies the necessary liquidity to the Stock market. Now a days, it is not a purely risky venture after the invention of many sophisticated investment tools (such as futures, options, short selling, stop loss orders, etc.), which help the speculators to hedge the risk.

Market Analysts also cater predictions according to the needs of the following types of investors/traders :-

•  Scalp Traders

Investors who perform many trades per day for scalping out small profits out of the bid-ask spread from each trade are known as scalp traders.

•  Momentum Traders

Investors who pounce on those stocks which move significantly in one direction and book desired profit are called momentum traders.

•  Swing Traders

They are basically fundamental traders who take delivery of trades for a span of short period generally more than one day.

•  Technical Traders

They believe that buying/selling signals are present within the graphs and charts of the stock.

•  Fundamental Traders

They perform trade on the basis of study of fact-sheets of the company like historical profit graph, balance sheet, anticipated earning reports, stock splits, mergers and acquisitions, etc.

The demands for Stock Market Predictions are gaining momentum among the traders and investors. This demand has generated Stock Market Guru s, Fundamental Analysts and Technical Analyst s to air their views through televisions, Internet, newspapers, mobiles, etc. Now a days, the stockbrokers are supplying Stock Market Prediction s as a value added service to their customers.

Hence we can conclude by saying that Stock Market Prediction is a part-and-parcel of the Stock Market for better and fruitful investment .