| The Various Factors Playing A Role In Defining Share Prices |
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| Written by Caysp Bounnie |
| Monday, 01 November 2010 22:28 |
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If it was possible to accurately predict the exact price of a particular share a month or a year from now, one could become incredibly rich. The fact is that we live in an uncertain world where a large number of factors influence share prices. Some of these factors are nearly totally unpredictable, while others can be predicted fairly accurately.
If it was possible to accurately predict the exact price of a particular share a month or a year from now, one could become incredibly rich. The fact is that we live in an uncertain world where a large number of factors influence share prices. Some of these factors are nearly totally unpredictable, while others can be predicted fairly accurately. One of the most difficult things to predict is the political climate and its effect on share prices. If you're unlucky enough to invest in a country and a military coup takes places unexpectedly, this will no doubt have dire consequences for your investment. If you had known about the coup, of course, you could probably have benefited greatly from your knowledge. Most of us probably don't think the weather can play a major role when it comes to share prices, but it can do. If your money is invested in a company that has a number of farms producing e. g. Tobacco, a severe drought will have a very bad effect on their profits. This will in turn have a negative effect on their share price. And to predict something like this is very difficult. Financial experts and economists employ mainly two kinds of indicators when they attempt to predict future prices of shares. The one group is called technical indicators and are mostly used by short term traders/investors. The other group consists of the so-called fundamental indicators, and most fund managers and long term investors prefer to use them when trying to make a forecast of future share prices. A fundamental indicator refers to something that plays a key role in the price of a trading instrument, such as a share. An example of this is the inflation rate. Another example is the exchange rate of the country's currency. Other examples are per capita income, Gross National Product and imports and exports. A technical indicator is usually a statistical analysis of recent price movements on the basis of which we try to predict future price movements. An example of this is the moving average. If the price of a share, for example, breaks upwards through its moving average, many share traders will interpret this as a sign that the price will increase even further. There are many other technical indicators, such as the Relative Strength Index (RSI), Bollinger Bands and Price Oscillators. Would it be possible to accurately predict the future price of a share if you had a complete list of the factors determining that price? The answer to that question is probably no. Even if you had such a list, every factor on the list would not play an equal role. You would have to assign a weight to each factor. You will, for example, have to decide whether the political situation will play a more prominent role than the inflation rate. Doing that will always be difficult, which means calculating future share prices will always carry an element of uncertainty. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Get complete details on how you can take advantage of Share Prices fast! Get the information that meets your needs and requirements by visiting WorldLink Global for real time Share Prices |
| Last Updated on Thursday, 04 November 2010 22:46 |