This article is for those who have been investing or trading for several years, but are looking for an understanding of the processes, as well as the logic of decision-making. Below I will outline my vision of this issue.
If you look at the stock markets, as well as various instruments, techniques, services, etc., which helps to make a decision to buy / sell or invest in a particular instrument, then we see a great many of them.
Every investor or trader takes something for himself. Someone trades the Fibonacci Lines. Someone on the Bollinger Bands. Someone makes a decision on the channel. Someone uses RSI, Stochastic or other indicators, of which there are a great many. Someone is looking for shapes and drawing lines. Someone evaluates the company fundamentally. Others use mathematical statistics or functional / wave analysis.
On the one hand, if you have just read the previous paragraph, you probably grabbed your head. And partly you’re right. On the one hand, there is an abundance of techniques and people who use them in a great variety. On the other hand, stock markets are hostages to themselves. Moreover, this is especially important in the context of the use of various trading systems, which are usually based on non-complex technical indicators, or other decision-making tools, which I wrote about above.
As a result, given the fact that many trading systems and traders are used that use predictable and understandable tools, the forecast itself is essentially a mathematical calculation.
Many people say that the stock market is not predictable, the processes are random. Alas, this is far or completely wrong for the reasons that I have named above.
However, if you look at the abundance of tools, then manually it is quite difficult for a person to make a decision on their own. Not to say that this is impossible, it is simply difficult in terms of time costs.
Let’s take into account the fundamental indicators. You need to take the reporting of companies, you need to make a forecast for revenue and profit, at least primitively based on regression analysis. And it is better to do it qualitatively based on the analysis of many factors, which you can see in the corresponding books on fundamental analysis.
Consider technical indicators. Take the most popular ones. The same OBV, Stochastic, MACD, Keltner channel and others.
You can build graphical primitives.
We will probably omit the mathematics, the overwhelming majority of traders probably do not even know the definition of the mathematical expectation. Therefore, we will not use mathematics in our arguments.
If we look at all of the above, then even for one tool to do such an analysis is a job. This is truly a work that will cost both time and money.
Think how many instruments (stocks) per day you can analyze? One ?? Two ?? Ten??
Personally, I am deeply convinced that at present, no self-respecting trader or investor will be able to cope without various kinds of automated systems that will take on the work of analyzing and filtering instruments, which ultimately will allow you to select the most profitable instruments.
For example, at FINRPOPHET.COM we have different neural networks that allow you to evaluate the instrument and make a forecast of quotes from different points of view. Both technically and comprehensively (technically and fundamentally).
For example, the picture shows the forecast for US bonds.
If we consider neural networks, then, in essence, it makes no difference what complexity and volume of data to analyze. You can drive at least the entire Library of Congress into them, not to mention the quotes data, reporting indicators, market conditions and other things. Neural networks will make the calculation and forecast more efficient than humans.
As for the logic of decision-making, as we see it:
1. A forecast is made using automated systems (for example, neural networks), taking into account many factors: technical, fundamental, etc.
2. For each forecast, the potential profitability is technically estimated based on the channel.
3. Technically, based on a number of indicators, the entry point to the instrument is determined.
We have neural network-based predictions in our service for: stocks, futures, currencies, cryptocurrencies, indices, ETFs, bonds, investment fund quotes.
More than 6,000 thousand financial instruments in 24 international markets.
There are also services for evaluating trading strategies based on the forecast for each instrument: https://finprophet.com/en/pages/instruments/strategy
For each strategy, a trading signal is evaluated based on indicators: https://finprophet.com/en/pages/instruments/signals
We see that the future belongs to automated systems.
You can get more predictions at FINPROPHET.COM (https://finprophet.com).
Successful investments and
victories in the financial markets!