These days, stock market investors commit many mistakes. Then they try to discover what happened to some classic ideas to invest in the stock market and old approaches that don't work. Is the stock market in the same or changed? As the age of economic integration in the world, new technologies and global problems affect investors in the stock market? Without doubt, in the last decade stock investing changed. Among the main changes are:
Globalisation (strong economic dependencies, accessible global stock exchanges).Technologies (news delivery, automatic trading systems powered by fast instant). Psychology of investors (high sensitivity to the news, more irrational behavior).
The stock market in the last decade characterized by price movements of stocks faster, less predictability and stronger dependencies on global factors. Due to the Internet, the news is much stronger factor too. Under the influence of modern news, investors are likely to give up a rational behavior and follow the temporal emotions. Specific information can drive the market easily through investor feedback fast. Changes in new-age three mentioned above have character up-trend.The stock market has a character of cyclic mixed trend. Suppose the recent trend of new-age continues and semi-cyclical nature of the market will be in effect. Therefore, the majority of merchants, not long-term investors can play the stock market in the future.
As we know, price movement of an action is a result of supply and demand. There are several factors that traditionally have an effect on the balance of supply and demand and consequently form a stock price. These are: foundations of enterprise, market conditions in the industry, national and global economies, different types of news, opinions of analysts and experts, signs of technical analysis, cyclical and seasonal fluctuations, investor psychology, etc. Of course, the key to successful investing is the ability to provide these and other factors.
Typically, the stock market prediction can be built on the following approaches: efficient market hypothesis (he states that prices of capture all information known), fundamental analysis (macro-economic conditions considers and performance of businesses) or technical analysis (it uses historical statistics of prices and volumes to detect a trend). That approach is better? The combination of different methods can improve the accuracy of the prediction? In fact, different investors use different approaches and insist that they are right. It seems that the different groups of investors have good gains in different periods (not all the time).
It is possible that some factors become more dominant time-of-time and unity of the market. If we knew the factors that are most influential at every moment, we could implement methods of prediction that are the most appropriate.To this end, the science knows at least two techniques that may be useful: evidence and hypothesis testing.Both can be employed by or own research using software tools that is available. these tools must be sufficiently powerful to carry out a posteriori verification simulations for composite hypothesis.Composed of forecast for a particular action must include at least the most influential factors.In fact, fundamental, technical, and lifecycle analyses were implemented in different software tools for a long time.However, that pushes news factor currently on the market is difficult to formalize and measure by automatic tools yet. so that investors should be informed about selected actions and global market news on a regular basis to make an additional qualitative analysis.
In short, a modern stock market is different than it was ten-twenty years ago, when a strategy of "buy and hold" was good enough. now it is much more difficult to be a worthy investment return without a good research and analysis. Today, the direction of the global market a individual stock significantly influences, many traditional approaches fail, the stock market changes its character and emotional factors become more powerful. currently, winner in the stock market is mainly based on appropriate information and tools.
Alex Shmatov, President and founder of Addaptron Software, MBA in finance and PhD in mathematics, working on developing stock market software-decision support systems for investors.
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