by Bianca Raven

Created on: September 20, 2008   Last Updated: October 08, 2008

Predicting Stock Market Movements

Is it really possible to predict the movements of the stock market?

Even if you can predict the movements, is your investing strategy strong enough to still profit regardless of whether the market is moving up or down?

Before you frown and think it's not possible to profit if the market is dropping, think again. With just a little bit of knowledge of the stock market and the various ways in which you can increase your investment returns, you really can learn to profit no matter what the market is doing.

Rather than follow the entire market as a general whole, perhaps try focussing only on those stocks in which you're planning to invest. Even when the market is trending downward, some stocks can still rise spectacularly - and vice versa!

Let's look first at ways to help predict where the market might be going.

Charts

Every stock market in the world has a website available which shows the trends for every stock available. This information is freely available and very easy to follow.

Simply visit your local market's website, click on the link for information about the particular stock you want to know about and take a look at the chart provided. You'll see plenty of squiggly lines that show the up and down movements of that stock's price over the last few months.

The easiest thing about charting is to remember history often repeats itself. By watching the graphs and charts available as they are updated, you'll see trends emerging. You'll be able to plot purchase points and sell points on each section of any graph. By knowing roughly how the movements affect the pricing of each stock, you will be able to increase your chances of buying relatively low and selling relatively high.

Corporate Actions

One way to estimate whether a particular stock may rise or fall is to check out the individual company in which you want to invest.

An impending corporate action, like a merger or a take-over bid may drastically increase a company's share price even if the market in general is trending down!

By knowing a little bit about the company your investing in you can increase your chances of beating the market averages.

Dividends

Knowing when dividend payments are due or being paid can also increase or reduce a share's prices.

There are some investors out there who only invest for the dividend farming'. This means they'll buy into a stock, take the dividend yield and then sell out once the stock turns ex dividend'.

If you're looking at buying into a stock where the price seems cheap, double check whether the stock is at ex dividend' or cum dividend'.

If you buy when the stock is being sold as ex dividend', this means you've bought that stock without the right to the dividend allocation. The person who sold it to you receives those dividends and then sells off the stock at a seemingly low price.

Opinions

Something to remember is that people are often a little like sheep if one person says sell, the majority of the herd will follow suit.

Just because the media says sell, this doesn't mean you need to follow the herd and sell. The media is paid to make people read their newspaper or watch their news program. They are not paid to report good bargains or great opportunities.

The same holds true for advice from friends and family. If you're receiving advice from people who haven't made large profits in the stock market, why would you listen?

Be confident in your own investment choices, research your own options and don't ever be afraid to go against the herd' mentality and strike out on your own.

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