One of the factors that most investors look into when making decisions is market performance. The current performance of the market can help establish for the investor whether it is time to buy or to sell. Trying to look at market performance and predicting its future direction may help investors become more successful in their investments. But it is easier said than done most of the time. Here are some of the important views about the market and how they may be able to tell you about market performance.

Martingale View

A martingale is a mathematical series of numbers where the best prediction for the next number is the current number. Despite the existence of charts and ways to predict a market trend or reversal based on certain factors, there are some investors who takes the view that market prices act in a random manner. In this case, the stock price is a martingale that is not affected in any way by past price history or estimated future price. The only way to predict tomorrow’s market is basing it on the current stock price along with its estimated volatility.

Momentum View

Another way to predict market performance is by taking advantage of momentum. There are many investors who base their trading decisions behind the belief that a current market movement may likely continue on the same direction. This concept on market performance can be traced back to behavioral traits of a general number of investors in the market.

It seems that momentum is what makes a certain stock continue in the same direction. It is rooted by how most investors usually think. Investors usually want to invest in something that they think will profit them. Momentum plays a big role in making people invest in something. This means that they usually bet on current winners showing positive inflows. As more and more people invest, the market goes up, which further increases the number of people to invest. Momentum also plays a similar role in losing investments. Poor stock performance will usually lead to even poorer stock performance in succeeding days.

Value Investing

There are also investors who view the market as full of stocks that are not priced according to their value. When they see an inefficient market, they try to look for those investments that are cheap but have an inherent value that will reward them later on. Underpriced stocks are lurking somewhere and they try to find them based on the price to book ratio. Such investors hope that they invest in such stocks before readjustments are being made on them over time.