This is supposed to be a sequel to the earlier thread I started,
First of all, I am still a learner in the market so pls question whatever put down here. That will help either to clear my point or it will help all of us to learn something new.
I have read quite a few articles/books about how to make profits in the stock market, have observed how some of the successful investors/traders had earned fortunes, have tried many ways myself as well. I have put lot of efforts to find out, if ever existed, a 'common factor' behind all successful strategies: also tried to understand the stock market in different ways; using economics, accounting, human behavior, psychology etc etc.
Finally, a little of my mathematical background gave me a 'perfect' way to model the stock market. One by one, the puzzles I had were solving: finally the ball of thread was untangled.
So this is an effort to show you how I understand what the stock market is all about.
Before, introducing my model, I would like to start with one of my observations.
A stock (share, counter) usually moves in a cycle: sometimes goes up, sometimes down and sometimes sideways (no move). And, we can see that it moves up approximately 30% of the time; Moves down 30% of the time and moves sideways 40% of the time.
Now let's see some investor invests randomly in a share (stock, counter).
What are his/her winning chances?
According to my observation, only 30% of the time he will see his share moves up; 70% of the time it will not move up.
Accordingly, if we try to trade RANDOMLY, we will loose more than 70% of the time.
Then we need to find what are the methods we can deploy to increasing our winning chances. And if possible try to understand how and why these 'methods' work.
That is the objective of this thread.
Kindly tell me if the above makes any sense to you.
To be contd....