PostHeaderIcon Different Stock Market Views

Stock MarketStock traders are usually known to follow a certain trading or investing method based on their individual views of the market. How they are able to perform in the stock market is usually influenced by how they view it. This further helps traders and investors develop their own investing decisions based on how they view the market circumstances at a certain period of time. Here are some of the common market views that influence most of them.

Market Momentum

One of the more common market views that traders consider as market wisdom in momentum. It is the belief that market trends tend to continue on the same direction. This view is somehow based on some ideas on behavioral finance. Most investors tend to choose stocks that are on their way up rather than those that are on their way down.

Mean Reversion

Another view of the market that many investors seem to rely on is on mean reversion. It is the concept that most stock variables such as price tend to even out over a certain period of time based on their averages. This means that if a stock price go above its historical average, chances are it might be on its way down in a matter of time. With this type of market view, investors are usually not keen on buying stocks with historically high market prices. Such traders and investors, however see good opportunities in stocks currently having historically low prices.

Martingale View

Some traders do not seem to be too concerned with market momentum or mean reversions. Some view individual stock prices according to their present price and never bother with past market trends or possible mean reversals. This is based on the martingale view that asserts market variables such as price do not depend on past pricing trends or on future market trend price estimates. A martingale is a mathematical series in which the best prediction for the next number would be the current number. In trading, this view helps traders focus more on the current pricing and the volatility of the price rather than on past or future trends.

Value Driven

Some views of the market are based on individual stock value. Some investors are driven to buy stocks at low prices in the hopes of selling it high for a profit. They consider low-priced stocks as a product of an inefficient market that will adjust itself over a period of time. This will lead to the stocks being priced higher and therefore better earnings when they eventually sell.



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