Technical Analysis: An Introduction To Stock Market Prediction

Chapter 1

Introduction

1.1 Introduction to Stock Prediction

Stock market prediction means predicting the values of stock in near future. It helps in making the decision regarding whether to buy the stock or not. Several approaches have been tried out to predict the stock values of any listed company. Prediction methodologies fall into three broad categories [4]

1) Fundamental Analysis.

2) Technical Analysis.

3) Technological methods.

Fundamental Analysts are concerned with the company that underlies the stock itself. They evaluate a company's past performance as well as the credibility of its accounts. Many performance ratios are created that aid the fundamental analyst with assessing the validity of a stock, such as the P/E ratio.

Technical analysts or chartists are not

A stock is a type of financial asset that denotes part ownership on the assets and profits of a company. It also entitles the owner of the stock to receive dividends if the company chooses to pay some of their Profits to the shareholders. Typically, ownership of a stock also gives the investor a right to vote on corporate decisions at shareholder meetings. This exchange takes place through Stock Exchange. Eg. BSE (Bombay Stock Exchange) in India.[iii]

1.3 Objectives

The objective of this project is to predict the trend in stock market and recommend to its user whether to buy the stock or hold it. After prediction we need to train the computer to do trading by itself on the basis of input provided by user. The input include how much growth user is expecting and the time bound/limit. This can also be used in order to help predict best option portfolio to help or develop an options trading strategy to maximize returns.

1.4 Motivation

Many research papers have been written to help investors predict stock price as well as pick portfolio to maximize their returns. However, the there isn't much papers that exist for maximizing returns on stock options or predicting stock