Can stock market be predicted? Can anyone tell whether a particular stock’s price will go up or not? Often beginner-level traders and investors ask such questions. Here’s an aptly explained answer.
First of all, if any individual claims that they can predict the stock market 100 percent, that individual is delusional or simply a scammer. There’s no such thing as an absolute stock market prediction. But this is not to say that there aren’t ways to estimations.
So instead of chasing after so-called market predictions techniques, one should practice stock market estimations.
These estimations are subject to various factors that directly or indirectly affect the market movements. And begin any estimation requires two basic approaches to analysis. Let’s understand them one by one:
- Fundamental Analysis:
The fundamental analysis measures the intrinsic worth of a given stock, sector, or the market at large. This analysis confirms whether a given asset is undervalued or overvalued by comparing the analysis with current market prices or trends.
If you want to plan long-term investments then fundamental analysis is very essential for you. This analysis is accomplished by studying factors such as revenues, profits, returns on Equity (RoE), growth potential, peer performance, sector performance, etc.
This helps label a given asset class as fundamentally strong or weak.
- Technical Analysis
Technical analysis is a methodology of estimating stock market trends by carefully studying past market data. The market data here simply means, historical price data, market statistics using various representations and indicators.
The main purpose of various technical indicators is the identification of market patterns in order to get an insight into probable market movements. Some examples of technical indicators are moving averages, support, Bollinger bands, resistance, etc.
Therefore, one can predict the market to a certain extent only. And this too requires efficiency.
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