2 Stock Forecasting Methods You Should Use
Co-Founder & CTO of I Know First Ltd. With over 35 years of research in AI and machine learning. Dr. Roitman earned a Ph.D from the Weizmann Institute of Science
Whether you are looking for good investments or are into stock trading, stock prediction or forecast plays the most crucial role in determining where to put in the money or which stock to be acquired or sold. Market trends often reflect the mood of the market and not essentially the status of a company or the true value of the stocks. It is often that stock prices soar based on external factors and it is not uncommon to find stock traders and investors to base their decisions on current affairs and market trends while trying to forecast the stock of any specific company.
Stocks are volatile primarily owing to these reasons since external factors and popular beliefs are almost always based on no solid foundation. Consequentially, the stock prediction goes awry. The two stock forecasting methods any investor or stock trader must use are the Fundamental Research and Stock Forecast Algorithms.
Fundamental Research is a mandatory method for any investor. The method involves meticulous studying of a company’s financial health, the value of assets, debts, cash, revenues, expenses, profitability and plans of development. Fundamental Research is a well rounded stock prediction method for all the data that actually matters are taken into consideration while determining the true value of a stock A company may generate healthy revenue but owing to huge expenses, they may not be highly profitable. It is common for a well performing company to sit on a pile of cash and not use it wisely in other investment or diversification avenues. Having all these statistics can be very handy for any investor. Once you have all this information, it is easy to determine if the value of a stock is overhyped or below par. Thus, it is easier to forecast the future of a stock and determine whether to acquire a stock or to sell one. Fundamental Research also helps an investor since it offers insights to dividends the company has been paying over the years and you can have some statistical stock prediction and not just volatility.
But knowing fundamentals is not enough. It is common for stocks to move in waves. Stocks always fluctuate between “oversold” and “overbought” conditions. These terms describe the changing demand or popularity, and are relative to the time frame and to other investment venues. When gold becomes popular, lots of investors get caught in the “Gold Rush” and forget the stock fundamentals and sell stocks to buy gold. They forget that gold does not make anything and just sits there. It’s just a trophy, a protection against inflation at best. This is just one example of how different markets interact. Thus knowing the stock fundamentals is not enough. One can buy a good stock at the wrong time and lose money. Sure, eventually it should pay off, but meanwhile, you are in a deficit. Thus you have to be able to predict where the stock is heading.
Stock Forecast Algorithms are aimed at making the best use of the right time, right price and the right quantity of stocks that must be traded. The Algorithm in place helps a trader to forecast the time at which the price would be the most favorable to either buy or sell a stock. The system predicts absolutely on numbers and has not even remotely affected by popular emotions.
Finally, one should not get caught up in the daily trading, and miss out on global trends. This has been a decade of raise of China as the world’s strongest growing economy, the fall of Europe and its Euro, and the crisis in the USA. The excesses of fiscal policy, the foolish flight of the US industry into the cheap labor countries, and the expensive wars have ravaged the economy and weakened the US dollar. But all this is behind us, and it seems that these trends have come to the stall. Will they reverse their course? All this requires us to look at the different time ranges of predictions, not only the next week predictions, but also the longer term forecasts. Don’t assume that you will be lucky to get out in time. Downward corrections can come rather quickly and be sharper than the upward moves. Smart investors try to catch the wave, but they also get out way before it crashes. Don’t be the last one in!