These days, the stock market investors make many mistakes. Then they try to find out what happened to some classical ideas of investing in the stock market and why old-time approaches do not work. Is stock market the same or it changed? How the age of worldwide economical integration, new technologies, and global problems affect the stock market investing? No doubt, in the last decade stock investing changed. Among the major changes are:
* Globalization (strong economical dependencies, accessible global stock exchanges).
* Technologies (instant delivering news, fast-triggered automatic trading systems).
* Investors' psychology (high sensitivity to news, more irrational behavior).
The stock market of the last decade characterized by faster stocks' price movements, lesser predictability, and stronger dependencies on global factors. Due to the Internet, the news becomes much stronger factor too. Under influence of news, modern investors are prone to give up a rational behavior and follow temporal emotions. Specific information can drive the market easily through investors' fast feedback. The mentioned above three new-age changes have up-trend character. The stock market has a mixed trend-cyclical character. Let's assume that the new-age recent trend will continue and semi-cyclical character of the market will be in force. Therefore, mostly traders, not long-term investors, may play the stock market in the future.
As we know, a stock's price movement is a result of supply and demand. There are several factors that traditionally have an effect on the supply-demand balance, and consequently, form a stock's price. These are: company's fundamentals, industry-market conditions, global and national economies, different types of news, analysts' and experts' opinions, technical analysis signals, seasonal and cyclical fluctuations, the investors' psychology, etc. Evidently, the key to successful investing is the ability to predict these and other factors.
Typically, the stock market prediction can be built on the following approaches: Efficient Market Hypothesis (it states that the prices capture all known information), Fundamental analysis (it considers companies performance and macro-economical conditions), or Technical analysis (it uses historical prices and volumes statistics to detect trend). What approach is the best? Can the combination of different methods improve the accuracy of prediction? In fact, different investors use different approaches and insist that they are right. It seems the different groups of investors have good earnings in the different periods (not all the time).
It is possible that some factors become more dominant time-from-time and drive the market. If we knew the factors that are most influential at each moment, we could apply forecasting methods that are the most appropriate. To this end, the science knows at least two techniques that can be handy: proof from hypothesis and back testing. Both can be employed either by own research or by using the software tools that available. These tools should be powerful enough to perform back-testing simulations for composite hypothesis. Composite forecast for a particular stock should include at least the most influential factors. In fact, fundamental, technical, and cycle analyses have been implemented in different software tools for long. However, news factor that presently pushes the market is hard to formalize and measure by automatic tools yet. So that investors should stay informed about selected stock and overall market news on a regular basis to make an additional qualitative analysis.
In conclusion, a modern stock market is different than it was ten-twenty years ago, when a strategy "buy-and-hold" was good enough. Now it is much harder to have a decent investment return without a proper research and analysis. Today, the direction of the overall market influences significantly an individual stock, many classical approaches fail, the stock market changes its character, and emotional factors become more powerful. At present, winning in the stock market is based mostly on right information and right tools.
Alex Shmatov, president and founder of Addaptron Software http://www.addaptron.com, has MBA in Finance and Ph.D. in Mathematics, working on developing decision support systems for investors.
Article Source: http://EzineArticles.com/?expert=Alex_Shmatov
Monday, 14 December 2009
How to Start Investing in the Stock Market - A Guide
The stock market is a world all on its own. It has different rules, a separate language, and applications that are not used anywhere else in the business world. It can either be a physical location, like Wall Street or a virtual address where investors and traders meet in order to do business.
Like any endeavor in which you are a new comer, you will have to learn a whole new set of skills before you can be successful. Research and education lead to understanding, and understanding leads to better business decisions. There are rules that have to be followed and marketing strategies that need to be learned.
The following are a few simple tips to get you started off in the right direction:
• Get educated quickly on the market, stocks, trends, etc. There are many investors and brokers that offer free counseling,
• Set goals that you can reach easily. For instance, if your goal is to retire after a few months investing you're probably going to be very disappointed. If however your goal is to at least break even in the first 90 days, that is an achievable goal and it saves you capital if you are successful.
• If you have an instinct for this kind of trading, keep it under wraps. Stock trading is a lot like poker playing. Successful traders pay attention to their hunches but rarely share them.
• Understand the meaning and importance of annual reports and quarterly reports. Use our knowledge to check out companies, or even successful mutual funds, and pounce when the time is right.
• Diversify, diversify, and diversify. To use an old maximum, don't put all of your eggs in one basket. If you drop all your money into on or two stocks and they fall, you can lose it all. Spreading your investments among different sectors and stocks can protect you from one stock or sector failing.
• If you are in any debt at all you cannot afford to invest in anything as risky as Stocks. Clear your debt first. You are not required to be debt free to trade on the market but if you still have debt and you're thinking about investing its possible your priorities are a bit out of line with reality.
Though the above mentioned tips and hints are not all-inclusive but if taken seriously along with a little common sense and planning can take you a long way on the path to financial success and even freedom.
To learn more about investing online Click Here. Or to see how Troy Pryczek can mentor you to make money online, and to claim you're FREE! Internet marketing Boot Camp visit http://www.NewOnlineInvesting.com
Article Source: http://EzineArticles.com/?expert=Troy_Pryczek
Like any endeavor in which you are a new comer, you will have to learn a whole new set of skills before you can be successful. Research and education lead to understanding, and understanding leads to better business decisions. There are rules that have to be followed and marketing strategies that need to be learned.
The following are a few simple tips to get you started off in the right direction:
• Get educated quickly on the market, stocks, trends, etc. There are many investors and brokers that offer free counseling,
• Set goals that you can reach easily. For instance, if your goal is to retire after a few months investing you're probably going to be very disappointed. If however your goal is to at least break even in the first 90 days, that is an achievable goal and it saves you capital if you are successful.
• If you have an instinct for this kind of trading, keep it under wraps. Stock trading is a lot like poker playing. Successful traders pay attention to their hunches but rarely share them.
• Understand the meaning and importance of annual reports and quarterly reports. Use our knowledge to check out companies, or even successful mutual funds, and pounce when the time is right.
• Diversify, diversify, and diversify. To use an old maximum, don't put all of your eggs in one basket. If you drop all your money into on or two stocks and they fall, you can lose it all. Spreading your investments among different sectors and stocks can protect you from one stock or sector failing.
• If you are in any debt at all you cannot afford to invest in anything as risky as Stocks. Clear your debt first. You are not required to be debt free to trade on the market but if you still have debt and you're thinking about investing its possible your priorities are a bit out of line with reality.
Though the above mentioned tips and hints are not all-inclusive but if taken seriously along with a little common sense and planning can take you a long way on the path to financial success and even freedom.
To learn more about investing online Click Here. Or to see how Troy Pryczek can mentor you to make money online, and to claim you're FREE! Internet marketing Boot Camp visit http://www.NewOnlineInvesting.com
Article Source: http://EzineArticles.com/?expert=Troy_Pryczek
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