Science Behind Stock market

 

In this article I am not going to give you any kind of tip or trick to time the market nor I will teach you how to invest or trade in stock market because there any lots and lots of articles on internet but I would like to suggest that to know stock market better first you have to lose your money in it.

I 2 to 3 years ago my friend was very interested in stock market and I was also interested too at that time neither of us are earning money so we asked to our parents for it my parents told me big NO;  while his parents particularly his dad not only financed in it but also helped him as a partner. At that time we got to know about IPOs through broker, Broker said to us that just invest in IPOs and you will earn nice amount of money so my friend start investing according to broker's advice and he lost big chunk of his investment. From that I got to know about good lesson which not only applied to stock market but also to real world; and that is "if some plan seems very obvious to succeed that means you don't know any thing about it" because there is nothing in this world which is very certain to success.

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

                                                                     -Warren buffet

Those words are the key for the science of stock market because if you want to make money in stock market then buying price should be low compare to the selling price within the time passage. Now please focus on to that green line because it all depends upon the time price of stock could fluctuate from the lowest to the highest but we don't at at what time? we can predict perfectly that what will be price band of particular stock by observing it's historical data. But we don't know when we will get what price; that is the biggest drawback. Many people claim to beat the market but the truth is that they got lucky. 

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.

                                                                 ― Benjamin Graham, The Intelligent Investor

Let me share a new concept which I called cone of time. Think like that your share price fluctuation may be very less for one day in future or in past. As we go further in future the radius of cone will increase and after certain point you got to know that lower price reaches to zero which means that is the probable time period to devaluation of your share reaches to zero from this day and the cone will change every day. Cone suggest nothing valuable by which we can predict future but cone suggest at what time in future you can expect highest value of your share or lowest.

 In upcoming articles we will discuss about this time cone theory and I would like to elaborate it mathematically. Recently I have no idea how will I do this. So please stay tuned with this blog to know more about it. Rationality also plays major role in stock market.