Is there any real real logic works in stock market?

Question

I mean, any known principles do work in predicting, applying and getting profit in stock market investment, or it by mere permutations and combinations and pure luck only?

Answer 1

Yes its only logic that work in trading in stock market. be on the watch and buy promising funds.there are fund managers earning crores as package , so that means they do put in effort to maintain a reputation for the fund.
you can easily learn by observing the funds on a daily basis and learning about them. if you want to understand a fund meet a specialist . the best way to learn swimming is by jumping into the pool so dont assume things from outside, take the plunge and enjoy.....!

Answer 2

If there was any real logic to the stock market then we could all be millionaires and live happily ever after. The stock market however is linked to human emotion and we all know how unpredictable some of our fellow human beings can be :-) (thats what makes life interesting but that is a diffrent topic all together...)

Yes the stock market does go up on average over many years, BUT that is a weighted average of a group of stocks, that doesn't mean you can buy any share at all and it will go up. Some will indeed go up a lot, some will go down and some will go bankrupt... So even the average gains of say a Nasdaq or Dow, CAC40, dax or NIkkei does not help predict the future of a share or the stockmarket... The saying, the market goes up X% on average every year is a SALES PITCH and a LIE!!

Yes it is possible to 'predict' where a stock might go by doing technical analysis (which looks at past patterns), but as I said humans don't fit patterns so while you might be right sometimes you won't always be right. On average the only surity is that unless you know what you are doing its just like at the casino, the house always wins if you play to long. The only difference is that if you understand what a company is doing, understand the numbers and know how the laws will change in favor (or against) a company, own a sizeable stake in the company (2% or more) and a couple of other things then you can reduce the risk!!

There are lots of good books out there that will teach you how to understand what shares are and how they work. Find a good book, read it and you will be able to tame the unpredictable beast they call the stock market. My book recomendation is below!!

Answer 3

There are three general aspects of the stock market: (1) the technicals; (2) the fundamentals, and (3) the irrationals. Generally, some people trade stocks by the technicals, which is usually a graphical approach. Near here there are gag gifts sold as regional souveniors, A weather stone. A rock is hanging on a rope from three sticks tied together above it. If it is warm, the weather is hot. If it is cool, the weather is cold. If it is wet, the weather is rainy. If it is moving the weather is windy. That said to say this, if the graph of prices over time shows an upward climb, then you would want to buy into that climb. If the climb stalls and volume increases, then some surmise a turn, so sell or sell short because the price will be about to fall. Then the same for the other direction. Other technical traders are contrarians. If everybody and their dog are buying into XYZ, then sell because it is overbought. This touches on the Irrationals. You get the feel of why those graphs move the way they do because of news or notions. Usually, however, there are the fundamentals which drive some investments. Unconcerned about individual news, the fundamentalists look for things that add value: are earnings up?; are sales up?; is cash flow up?. The things that grow a business' value will, eventually, grow a stock's value. Yet it gets tricky. A mature Apple or Microsoft has a lower price to earnings ratio than when the company was younger and the technology fresher. When the P/E is 80 a little profit affects the price differently than when a mature company has the same profit with a P/E of 8.

Your choices are essentially these: go with the crowd (if they are buying, buy, and if they are selling, sell); go with the profits or comparative advantages (little companies with big profits are better than big companies with little profits or profitable companies that are gaining marketshare are better than unprofitable companies, so you invest in the one and not the other after discovering the difference); or take note of exhuberance (Google at $600?; Berkshire Hathaway when the big cheese is getting ready to leave?) or the weird (why is that little company suddenly on both the most active and top gainers list?). It is sort of like getting to know a football team, this one plays well against those teams, but not certain others. It isn't exactly luck, but it isn't exactly 2 plus 2 is 4 either.

Answer 4

The stock market prices move on Demand & Supply principle. The demand is from the people who think the price will increase while those who think otherwise, supply.

The word "think" assures there is logic behind each decision. All the demand oriented thinking combines against the Supply oriented thinking. The final decision is therefore a result due to the stronger of the logics.

Since it is but impossible to brainstorm the various possible logics, Technical Analysis, which reflects the effect of both logics, is extensively used to anticipate price / market movement.

Answer 5

No it is not like permutation/combination, we have to look many things before investing in stock market, some of the things u can do before investing in shares of a company are
1.analysis of company financial statements, like balance sheet, profit and loss a/c, operating profit etc
2.comparing the company with the similar kind of other company,( if u r investing in MRF , u should compare either with CEAT or DONLOP)
But in my view once if we start investing in stock market , then the money or the profit is repeatedly invested again and again!! what i am trying to say is all Ur profit will be in the form shares not like cash. and once u taste the up-going share price u will never sell Ur shares and convert the money into csah/

Answer 6

The simplest logic is that over a period of long time (say 20 years or so) the STOCK MARKET yields the highest returns.

For eg., Sensex started in 1979 with a base value of 100. Today, in 2007, it is at 14,000. The Sensex has multiplied by 140 times in 28 years. That is an annual percentage return (APR) of 19.30%. Add a dividend yield of 1.70%, the Total return for the 28 year period is 21%.

No other asset class, including the much touted REAL ESTATE, can consistently yield such phenomenal returns.

Therefore, there is a real logic behind the stock market. As time passes, the returns tend to stabilise.

Answer 7

Buying a share of stock is the same as buying a share of a company's future profits. You decide what they are worth and if the current market price is higher than that then don't buy it and if it is lower then buy it. If you have the tools to make that decision then you will do well because of your skill. If you don't have the tools to do that then you will be running on luck. It could turn out good or bad.

Answer 8

A bit of luck, support from God, tons of homework with fundamentals and technicals, and then HANGING in THERE. That is the most successful formula.

I have hunted more than anyone out there in looking for high probability formula or the holy grail and have not found it. Otherwise , I would not be on this web site looking for answers. I would have been at a beach on my own island in Fiji!!!!!

KKP

Answer 9

The inventory marketplace is going up simply by fact revenue are increasing that's frequently an illustration of an improving financial equipment. If it have been purely the banks i'd consider you, yet technologies shares are more suitable the way.

Answer 10

Yes it is possible to predict where a stock might go by doing technical analysis that is looking at its past performance. check the website link to learn how to select the best stock.

http://www.smart-investments.org/Best-Stock-Investments/How-To-Invest-In-Stock.php

http://money-review-site.com/shares.html