Actually the question would be… can you make predictions on the stock market? And if so, how to do them? The answer to the first question is yes, you can. But you have to take into consideration the risks that can be involved in making a prediction in trading and the stock market. We tell you about them below.
What is the proper way to make trading predictions?
You cannot know exactly what a price will do, you can have an intuition, you can pose a situation, but when making estimates for your investment, you will have to raise them according to the different scenarios that may arise.
By studying the different alternatives, you will be able to react and act like a true trader: it is that reaction capacity that you must enhance. So rather than wasting time and energy predicting what a stock will do, use that time to study and find a good strategy.
A good way to manage a trading prediction is to get rid of it once made, visualizing the different scenarios and deciding which one is the most favorite. That is, make a prediction but do not hold on to it: the market is volatile and changing and you have to be prepared. Predictions in trading are only in our heads: the market neither knows them nor takes them into account.
If you think that an asset is going to behave in a certain way, remember that you are only thinking about it, you do not know for sure what is going to happen. Assign that prediction a percentage probability and open yourself to other possible options; It is time to point out the one that you think is most likely but again remember: you are proposing different outcomes in your prediction.
The greatest risk of making predictions in trading is staying anchored in those predictions: the important thing is knowing how to react on time. Keep a cool head and be objective.
Of course, our trading courses train you to open your mind and face the different scenarios that can occur in a trade: prepare yourself before trading.
What is the Stock Index for?
The Stock Index is a great tool to be able to invest in the stock market; It is an indicator that shows the variation in the price of financial instruments with a series of common characteristics, its main function is to know how an asset is behaving, having previous references.
In short, the stock indices are used to:
- Provide information on trends in financial markets
- They measure the profitability and risk of the market
- Create indexed portfolios
- They are the basis of some investments such as EFTs or financial derivatives
I show you examples of the international stock indices:
↔ European Stock Indices:
► Eurostoxx 50: made up of the 50 most important companies in Europe
► IBEX 35: Spanish stock index
► Dax 30: the 30 most relevant companies in Germany
► Cac 40: French index representing the 40 companies with the highest capitalization
↔ American stock indices:
► Dow Jones Industrial: made up of the 30 most important and representative companies in the United States
► S&P 500: made up of the 500 largest companies in the United States
↔ Asian Stock Indices:
► Nikkei 255: made up of the 225 most important companies in Japan ► BSE Sexses: is the stock index of India and is made up of the 30 most important companies in the country
In any case, it should not be forgotten that a contract is a derivative investment instrument, and, therefore, it is complex to operate in it and should not be taken lightly. With these tools we can achieve high profits, but, also, it can lead to large losses, therefore, we must act knowing how they work, what they represent and selecting solid and regulated trading platforms.