Business & Finance Finance

Stock Price Direction Predictions

Introduction
It must be first declared that no one can envision approaching prices in an ever-changing stock market.  Any person who makes a foresight is just guessing, no matter how much information, education, or computing power they may have.

Financial Analysts
You may have seen price targets being put in place for certain stocks by financial analysts.  Their targets are usually based on an extensive amount of investigation and observation.  Can they predict future prices in this stock game?  Of course they cannot.  They are only making their best estimates.  However, a funny thing can occur when one or more well-known analysts fix price targets on a company - they can bring about a self-fulfilling prophecy.  For example, if numerous people believe these price targets to be correct, they will put their stock trading accordingly, which can cause the stock value to arrive at the goal amount. Bear in mind, there is not a singular, correct amount for a company.  The current value is built on many factors, such as the forecast profits of the company covering the next several years.  Nobody can foresee future profits, opposition, or the economy perfectly in their day trading.

Penny Stocks
A accepted trading game theme is penny stocks.  You  may have seen circulars for penny stock enrollments or newsletters.  They say things like, Company XYZ is $0.25 now however we have a target price of $2.75.  Are these just gimmicks to rip people off or do these people have magic crystal balls?  Many penny stock advocates are just trying to get hundreds of people to start buying a particular stock, which motivates the price to go notably higher.  Then the endorser or whoever compensated them to handle this may sell the shares they bought prior to the promotions for a fast, vast profit.  This is often an criminal activity for the promoters, particularily if they use erronous or misleading information.  This has been mentioned here as a word of caution to you.  It is common to suffer fifty percent or a lot of your money under a week if you associate in one of these promotions.

Insider Trading
One direct way of foreseeing monetary activity is to have inside awareness - company information that has not been released to the public yet.  Of course if you apply or distribute this information for the desire of making money with trading, you can go to jail.  Remember Martha Stewart?  She was sent to jail for charges related to insider trading.  This law was developed to help maintain a equal playing environment for investors.

Company Forecasts
Most openly traded companies provide quarterly guidance on the sales and profits for the approaching quarters.  They usually do not give share price predictions but the numbers they do give can be used to calculate an up or down of the current share price.  This may be as simple as calculating the future price using the current P/E ratio (Price per share divided by Earnings per share) with the forecasted earnings (profits).

Conclusion
Predicting prices is a very critical thing.  There are altogether too numerous factors, which cannot be controlled.  Simple or complicated predictive methods can be used but normally the easier method is using your instincts about the company and the economy to determine whether the value will go increase or decrease within your time frame.

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