Stock market prediction is a difficult as well as a risky venture. Knowledgeable investors with solid financial background base their predictions on fundamental analysis or technical analysis and sometimes even both. But most laymen depend highly on the market tips given by the experts while exercising their stock market predictions through investments.
Stock market investment is basically very unpredictable and depends greatly on the market risks. As a result the returns also vary widely. Stock prices are generally determined on the consideration that market is the most important factor and ignores the economic, political and all other related factors that might impact market conditions. Hence stock market prediction can never be guaranteed. Presuming that the investors behave rationally, the value of assets is estimated based on future expectations. Every new floating market information is bound to affect future expectations and thereby the stock prices. And these erratic information influences the stock prices randomly thus making the market volatile.
Two most common methods of predicting stock prices are fundamental analysis and technical analysis. While fundamental analysis looks into a company's data such as cash flow, return of assets and history of profits that might directly influence the value and price of a stock, technical analysis uses statistical tools, charts, etc. and also takes into consideration the historical stock price movement patterns.
Stock market prediction differs from investor to investor and is never uniform throughout the market because it depends upon the nature of investor, whether he is looking for long-term investment or short-term window. Depending on this concept, stock market prediction might be based on traditional investment or trading / speculation. Traditional investors buy or sell securities with a medium or long-term perspective and they rely heavily on fundamental analysis whereas traders try to grasp profit from the minor ups and downs of stock prices throughout the day. They constantly have to watch the market in search of an opportune moment to trade their stocks.
Speculators base their decisions on market prediction with technical analysis. These short-term predictions are essentially risky and is different from traditional investments because of their higher than average risks of loss. But at the same time this practice cannot be necessarily looked upon as gambling as these speculators trade on the basis of informed decisions. They hedge their funds with the help of varied investment tools like options, short-selling, stop loss orders, etc.
Market analysts help different traders with predictions depending on their needs. For example, scalp traders performing several trades per day for small profits, momentum traders taking advantage of a steady price curves, swing traders looking for short-term trading lasting a little more than a day, technical traders taking their queues from graphs and charts and fundamental traders comparing data sheets, earning reports, stock splits, mergers and acquisitions, all trade on the basis of stock market predictions in the form of wise words of the stock market experts airing their views and opinions through the varied channels of media like mobile alerts , newspapers, financial magazines, Internet, television channels, etc.
So it can be justifiably concluded that stock market prediction is absolutely essential in today's scenario for more profitable investment results. Predictions nowadays are not about pure gut feelings but have a scientific basis.