Is it possible to forecast stock price correctly?

Is it possible to forecast stock price correctly?

You can check the answer of the people under the question at Quora “black rifle coffee stock price prediction

0 thoughts on “Is it possible to forecast stock price correctly?”

  1. The answer by Trent Nevills is a stupid advertisement. I hope people downvote it.
    I believe that it’s possible to forecast stock prices correctly in a small fraction of situations. However, there’s no such thing as a perfect bet – the best investments simply have a very high probability of working out rather than a 100% certainty. Prices can generally also only be predicted directionally. Predicting them with precision is literally impossible.
    Look at Warren Buffett. He is living proof that someone is capable of forecasting stock prices correctly repeatedly over a career. He is not the only example. There’s a lot of people who have made lots of money doing it.

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  2. Depends on how you qualify ‘correctly’. Accurately it is difficult, but not impossible. Correctly means you do your homework, understand their business model and know how to compare that, again, correctly, vs. other equities in the market – afterall, your stock isn’t cheap until it is cheaper than the alternative stocks out there. One way to alleviate the burden of the enormous comparative analysis is to subscribe to people doing it for you via newsletters (I really like http://www.nextinning.com/ for that), reading numerous opinions (which sadly are about as worthwhile en-masse as you might expect, but there is always a correct one within the mix) or take the power yourself and buy data services such as ThompsonReuters or use a free tool like Tweaker (available under Tweakerlabs for iPhone/iPad now, Android and web soon). Tweaker is a very robust way of analyzing any stock as it breaks the company down into cash flow, how fast cash can build on the balance sheet, charges for debt and then compares that to every other stock trading in the market with a risk vs. return trading range – all in seconds, for free. Social features are coming soon, too, that will empower you to see what everyone else is doing; see if that stock that plummeted really deserves it or that super-hot stock everyone owns at $1 is now worth it at $300. And, of course, good luck is always important in stock price prediction.

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  3. You cannot predict what the price of a stock will be in the future.
    All technical analysis is a reflection of where the stock has been. It does not foretell the future. You can determine support and resistance and HOPE that it holds. You can determine trend and HOPE that it continues. You can identify overbought and oversold and HOPE that it is the end of the move and will reverse. But nothing foretells what WILL happen tomorrow.

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  4. Yes offcourse. You can predict stock prices .share market is all about the prediction based on information, news, chart analysis. But it’s not necessary that each and every time your prediction would be right.

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  5. Yes but not Indian stocks, based on other countries except India. Indian are scammers, thieves , parasites and criminals . They can cheat and Rob anyone for $$$$. Never ever trust, Indian stocks

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  6. There is no prediction, only speculation. When you predict, you have decided that you have knowledge that is superior to every market participant. Prediction is hubris and will annihilate you.
    Know that anything can happen and that you will never know with any significant certainty where a price will move.
    Speculate and manage your risk.

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  7. Please read the next line very carefully. It will probably save and make you a lot of money.
    You can’t.
    Stop believing everything you hear. When the big buys invest, they’re investing mostly on the back drop of economics. Learn economics. Find market segments that are experiencing disequilibrium or a short-term ‘low’ that should level out. Look for the best companies in that segment. Pick one and wait until the economics level out. Take profits. Repeat.
    You don’t need a chart with 16 different colors and lines going everyone and in every direction to know that there’s no other real way to move commodities around the globe without shipping. If shipping prices drop too far down, the most leveraged companies will be the first to go. When they go, the supply of ships will drop, increasing the price back to sustainable levels. Buy when its low, wait for it to recover, collect your dividends, and be on your merry way. Research Navios’ shipping companies.
    Good luck!

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  8. I’m from China and I once did some analysis on the China Stock Market before. It’s rather poor performance to predict the price directly. However it’s still possible to make money from the poor performance prediction. For example if you long the stocks ranking on the top of the positive change of predicted price based on the learned predictor, it’s possible to earn in China Stock Market with a strategy with sharpe ratio above 3.0.
    Though it may not be possible to forecast stock price correctly, it still help to make money, at least in China Stock Market.

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  9. Depends on how accurate you want to be, and your time frame.
    If you don’t mind being wrong almost as often as you are right, then use technical analysis and try and guess where it will move day to day.
    But like any prediction, in the end it is mostly just a guess.

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  10. The field of technical analysis attempts to do exactly that. Based on historical prices, technical traders use volume and price patters to estimate where stock prices will go.
    Most long-term investors and academics dismiss technical analysis as futile. According to them, prices are largely random and driven by investor psychology, which makes them unpredictable. Instead investors try to estimate intrinsic value of a business, and expect that prices will approximate this value in the future.
    Famous investor Warren Buffett used technical analysis initially, but then stated: “I realized technical analysis is not working, when I turned the chart upside down and didn’t get a different answer.”
    Accurately forecasting stock prices on a consistent basis is nearly impossible, there are just too many factors that influence daily moves. On a long-term horizon however, stock prices tend to approach intrinsic values of businesses.

    Eight O’Clock

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  11. You can’t. There can be trends, formulas, theories, opinions. But you can’t predict, when you think you can, and some people think they can, that is delusional. Good companies do better than bad ones, but still, good companies can go down tomorrow, and for the next several years. You can’t predict that. Now, you can use insider information,…ask Ivan Boesky how that worked out.

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  12. Price to Earnings ratio is one of the traditional methods to analyse the company performance and predict the prices of the stock of the company. This ratio considers the market price of the shares of the company and the earnings per share (EPS) of the company.

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  13. I think the other answers have answered to that quite accurately. Therefore I’m going to give you a bit different approach, but a good tip which I learned one summer interning for an investment fund.
    Then I was a noobie and most of the investing I did was with my own money at home. My manager said to me: “It’s fairly hard to make money/ predict where the big stocks are going (Apple, Microsoft, IBM, etc.) because almost for certain the top analysts at Wall Street have already found a way to make money on them. And because of that it’s more complex to predict them or make money on them. So when you’re starting out you should opt for the more unknown stocks. They are a lot more easier to predict because there are less unknown factors having an effect on the stock price.”
    For me that worked well, and I believe that it’s an important thing to know when investing or tryong to predict where the stock is going.
    Which brings me more to the actual question. On many occasions it depends on the complexity of the stock. So to be exact on your question: Yes it is, but to my knowledge it becomes increasingly easier the more “unknown” the stock is.

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  14. You need to understand the intrinsic value of the company, which is defined as the true value of a company or asset. When the intrinsic value is less than the valuation that the market is ascribing to the company, then the stock should eventually go down.
    The Discounted Cash Flow model is the most common way to determine the intrinsic value of a company. In this approach, investors project future cash flows and discount them back to a present value using the company’s weighted average cost of capital. There are a lot of assumptions that go into this approach, which makes it subjective.
    Unfortunately, we have an imperfect market and, even if the investor determines an accurate intrinsic value, the timing of a given stock correction is extremely difficult to determine.

    Dunkin’

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  15. You can’t for certain. The emotional panic factor has alot to do with buying things undervalue. Some people buy on histograms and profit or free cash flow. Some just look for low performers at the moment that they believe will return to profitability.

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  17. There are a variety of technical analysis indicators.
    Moving average or moving average line – a plot of the arithmetic mean of the share price over the past few days.
    Moment buying fundamentally sound stocks can be determined using the support and resistance lines.
    Bollinger bands.
    This indicator is similar to the previous two. On the trading system screen displays four graphs. Also this moving average rates and two corridor lines separated from the average value of two standard deviations in each direction.
    Another commonly used indicator is the Relative Strength Index – RSI . It is quite convenient to use for determining the date of purchase of securities in its portfolio.

    Peet’s

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  18. Not easy…..nearly impossible.
    Surprising bad news, heavy shorting, and bad earnings can send stocks down quickly, before you can even turn on your computer. Good news, great earnings does the opposite, but again, even with adequate research, unpredictability reigns in the short term.
    What you can do is find undervalued stocks, overlooked stocks, out of favor stocks that might have upside potential. Even then it might not be realized for several months or even years.

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  19. Actually there is no best way or any other way to predict the movement of stock prices. When you say predict- it means nothing less than speculation. What our business gurus or so called technical experts or for that matter the business channels does is nothing different than speculation.
    I know that people will say that based on technical analysis you can predict the movement of the stock prices but then these are technical points only which leads to speculation at the end.
    I will give you one example by which it should be clear to you what do I mean. Suppose you have the best of the technical chart explaining that RSI and everything is in favour of price rise of any particular stock. And you are hearing all the news which are positive for the stock. And . . . .hold your breath . . . then comes the news . . .that XYZ sector or xyz company promoter is leaving or has been caught with so and so thing – so what to do you see – all the indicators which were positive on technical desk starts giving negative signal in one second.
    So the bottom line is – technical chart is made of news and rumours and it can be made artificially. Also, that your so called indicators follow something and not the actual thing of the stock.
    Recent meltdown could be a best example also – Many companies which were making life time high a month back were made available at more than 50% discount – Any takers???? Did any technical guru tell this or was in the position of doing this? NO.
    DO YOUR HOMEWORK – FOLLOW YOUR GUTS. REST ARE HERE TO MAKE YOU FOOL TO MAKE THEIR MONEY.
    I have been investing in stocks for more than a decade and believe me i have always benefited from my homework rather than believing on chart and channels.
    The fact that 98% people lose money in stock market – is not a myth – it is made a reality because they refuse to believe in learning by themselves and follow someone else advice. I chose to be in 2% rather.

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  20. Hi,
    Stock markets are purely driven by human sentiments and unfortunately there is no machine developed till now to predict how a human will behave in the next minute exactly.
    Nowadays, there are many analysts and automated tools are analysing and processing tons of data to predict the stock market. But , everything is in vain. But no worries. You can have your own style of predicting the things which you learned from your childhood.
    You can try to apply as much as and as smart as you can in the stock market. Some times it will reward you and many times it will betray you.
    Only mantra is to try and try and try…but don’t stop . Be wise and drive by your own instincts and intelligence rather than reacting to the news channels and nearby people ideas.
    Once you learn more about business,you will have a wider perspective in predicting and analysing the trends which you can apply in the stock markets.

    Victor Allen’s

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  21. Most of the market experts quote P/E and P/B ratios to check the stock whether it will be go up or down. However some other factors/parameters which can be looked upon are :
    Dividend Yield : Dividend yield=(Annual dividend/current price)*100
    If the dividend yield is low, the share price is relatively higher than the dividend paid and hence the stock may be overvalued. This indicates a possible decline in the future. A high dividend yield, on the other hand, means subdued interest in the stock and that the company is trying to woo investors by paying higher dividends. It means the stock price is undervalued.
    Interest Rates : Changes in interest rates impact companies. Conventional wisdom says one must buy shares when short-term rates (treasury bills) are low and sell when they are high.
    Trading Volume: If the price of a share is increasing with higher than normal volume, it indicates investors support the rally and that the stock would continue to move upwards. However, a falling price trend with big volume signals a likely downward trend. A high trading volume can also indicate a reversal of trend. For example, a drop in the share price with very high trading volume is viewed as a sign that the stock has hit the bottom.
    Put-Call Ratio : A put option is an agreement between two parties to exchange an asset at a pre-determined rate on or before a specific date. The buyer of the put option has the right but no obligation to sell the asset (stock, commodity) at a specified price on or before a fixed date, while the seller has the obligation to buy at the pre-specified price if the buyer wishes to exercise the option. A call option, on the other hand, gives the buyer of the option the right but no obligation to buy a particular asset from the seller of the call option at a fixed price on or before a particular date. The put-call ratio is calculated by dividing the number of traded put options by the number of traded call options. If the put-call ratio is increasing, it means the number of traded put options is increasing, signaling that either investors fear the market will fall or are hedging their portfolios foreseeing a decline.
    These are some other factors which can be looked upon to decide. Happy Reading 🙂

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