Price, an indicator of the stock movement

Before investing in a stock market, you need to have a view of your time horizon. Are you investing for long term or short term? On what basis do we decide the time frame and what factors would determine it and help us to analyse it.

The general notion is a trader invests for a short term and an investor invests for long term. But in reality, there isn’t much difference between a trader and an investor. Suppose a trader buys a stock and unfortunately stock keeps falling then he is compelled to become an investor and he will not exit until he receives the price at which he bought or make some nominal profit.

So, a trader becomes an investor when he has lost major chunk of his capital. People trading in the stock market generally prefer to go short term and whoever has long term holdings is out of compulsion to recover his loss.

To analyse the movement of a stock we consider fundamental and technical analysis. Fundamental analysis gives information about the balance sheet, income statement, cash flow statement etc. Technical analysis takes into consideration the movement of the price of a stock and its behaviour.

Price has a set behaviour and pattern. Technically, the price history of a stock determines the current price of the stock. The concept of trend is very important in technical analysis. Fundamental analysis gives long term triggers and technical analysis gives day to day price movement understanding.

Price discovery is based on several factors like buyers and sellers, global conditions, future markets etc. Price constitutes participants, analysts, agents or advisers. A smart investor will always follow the price behaviour of the stock. Technical analysis is never done in isolation. Technical analysts take decisions based on the fundamental analysis also. Price of the stock is a major indicator to be studied to analyse the movement of the stock.

Price gets affected by various factors like fundamentals, global conditions, news related to market etc. However technical analysis is more important than fundamental analysis. Amidst this scenario the market gives a sense of fear to all its traders and investors because there is an element of uncertainty or probability.

Everyone comes to earn money in the stock market but when they lose the capital they spend most of the time in just retrieving the capital. Fear of loss of capital is imminent. Fear is conducive for protection of capital. Element of randomness does not work in stock market, an in-depth analysis of the stock is a prerequisite for trade. (The author is a homemaker who dabbles in stock market investments in free time)