Different people have different opinions about stock markets.There is a section of people who consider working in stock market as a high class gamble.Then there is also a set of people who earn their livelihood by trading in stock markets on regular basis.But it is also a fact that you can’t survive by solely relying on gambling.So what actually stock markets are?
Every common person knows that there is a stock market where share prices keep rising or falling,there is a lot of risk in playing in markets,it is a type of gamble where you never know the direction of share price movement etc etc.The point of these people about not being able to know about the direction of price movement is right to some extent.Sometimes markets just surprise everyone and start behaving opposite to our expectation.And this is also not without any reason because the market has come to know about some news much earlier than us and starts reacting to that news.
Talking about the share price movements and market movements,it is not dependent upon a single factor.And at least it is never a gamble.There are fundamental factors related to working of a company which effect its share price over the medium to long term.They may be good or bad corporate results,corporate activity in the form of expansion or contraction of business or any factor which affects company performance.We can know better about that by doing the Fundamental Analysis for that stock.
Similarly,in the short term periods,the stock and market moves are influenced by technical factors.We as technical analysts,can predict the stock movement to more accuracy by doing the Technical Analysis.We study the technical charts of various stocks.Technical Indicators are applied on these charts.This gives the almost precise target price for a stock and also a stop loss to exit out of market to keep our risk minimum.Technical Analysis works on the principle of ‘ History Repeats Itself .‘
By using technical analysis or fundamental analysis before jumping into the markets,you increase your success rate in markets substantially.It is not that it is always 100% correct but even if you are correct 60% of the times,you are going great in markets.If anyone is going 100% correct,it is most probably sheer luck and not a skill.You can take better investment decisions on the basis of Fundamental Analysis while Technical Analysis is best for short term trading.Combining both analysis can be even better for starting an investment.
Now we come to know that stock markets and share prices don’t keep fluctuating by themselves but there are a lot of factors which are playing behind the scene.We need reading and analyzing these factors carefully so that we can play the markets with success.You should keep the phrase out of your mind that stock markets are a gamble.Actually markets trading is a business which requires sufficient knowledge and skill to succeed.Experience also has its role to play while working in stock markets.
Finally,we can conclude that if we don’t know anything about stock markets,then it is gambling.When we learn about the markets and apply our knowledge then it is investing and trading.Knowledge brings consistency in success while in gambling,you can never be successful consistently.So approach markets always as a business.
You might want to read why trading is the best business in the world as well.Keep learning!