As an investor, the current price of an investment and the future selling price of that investment are the two essential prices that you need to know. But investors tend to review past prices and use pricing history to predict how it might influence future prices. Depending on their calculations, investors buy and sell stocks, avoiding stocks that rise sharply or stocks that are falling.
Experts go to great lengths to figure out and explain the stock market using a variety of theories.
Why do Stock Markets Fluctuate?
It is crucial that we establish why stock markets go up and down. The stock market is a common ground for both buyers and sellers to come together. When the number of buyers are more than the number of sellers, there tends to be an increase in stock prices, while on the other hand if the number of sellers are more than the number of buyers, stock prices decrease. Now, the reason why people are buying and selling, is sometimes less logical and more emotional. It is difficult to predict emotions, so trying to figure out how a market might behave tends to be a difficult task. The stock market is designed to be unpredictable in nature, but the truth is, what goes up must come down at the end of the day. If stock prices are shooting through the roof, they will come down sooner or later.
It is an impossible task to perfectly predict future stock market trends. But the next best thing you can do is to increase your knowledge and read up as much as you can. It is better to have some working knowledge at hand, rather than knowing nothing. The very reason markets are becoming more and more volatile, is because everyone has access to information and innumerable resources to react to information.
What needs to be understood is that in the world of investing, the word perfection does not exist. You cannot be certain about everything and sometimes you have to leave something to the market forces. When you are dealing with stocks, you should be concerned about protecting the investment and the probability of gaining a profit. You should have a plan of action in place that will keep increasing your probability of being right. That is the closest you can get to being perfect. The reason for this is the unstable nature of the stock market. You cannot be a perfect investor if the stock market is incredibly volatile.
You cannot be right all the time, so if your probability of being right is greater, then you will make more money.
What Goes Up Comes Down
As we mentioned earlier, the stock market might be volatile but it is no stranger to the laws of nature. If it goes up, it will come down only to go up once again. The stock market tends to move in a cycle and to make the situation less frustrating, all you can do is calculate your position depending on the position of the cycle. However, there is no reason to assume that the stock market is only luck and no skill. With a bit of skill, you can create your own luck on the way.