The stock market is a rapidly changing place due to several economic and social factors. In case of any certain change, the stock market will show differences based on what the type of trading being transacted. The stock market can be quite volatile at times, and knowing and perceiving what is about to come next is not an easy task. Most traders and companies rely on stock market predictions to choose the right stocks to trade in. Predictions help in deciding when to trade and what to trade in, and if stocks were already bought, which stocks will fall or rise in price in the future.
Stock price prediction
Stock price prediction is a process that involves predicting the future price of the stocks or a market sector. The stock prediction involves taking into account various factors like the company's condition, economy, past figures of the company and charts. Other than numerical factors, there is also rational and irrational behavior of the traders which indirectly affects the stock market. The predictions are a combination of fundamental and technical analysis. This is the reason why there is a high demand for ways to predict, as it helps the traders to understand the market and trade for the benefits either short term or long term.
However, singularly studying and understanding the share market is not an easy task and requires a lot of experience and knowledge. Many errors can occur and thus finding accurate predictions becomes quite difficult. This is the reason why machine learning and predictive analysis are now being used more and more to predict the future of the stock market.
Technical analysis
Stock market predictions and analyses are performed using two techniques. One technique is commonly known as fundamental analysis, and involves studying the financial and operational performance of companies. This process gives an idea of the companies’ profitability as it directly affects the share prices.
However, the type of analysis which is more common among traders is technical analysis. In technical analysis, the statistics and charts play a major role. Here mostly the graphs and statistics of past stock trends, price and volume are taken into consideration. As technical analysis is the type that produces real set data to work with, machine learning techniques are used with technical data only. The data sets from financial records of the companies are used as input into the algorithms to get predictions.
Tools used for prediction
When it comes to stock market prediction using the machine learning tools and techniques, there are several options to choose from:
- Moving average: In this lagging indicator, the future prices of the stocks are predicted by taking into consideration the past prices. It helps in finding the trends and also eases the fluctuations.
- Stocker module: The stocker module is a commonly used Python library with varied functions that give close to accurate predictions of the stock market behavior.
- Linear regression: This method helps in figuring out the general trend in which the market is proceeding, thus giving a vague idea of what to expect from the market.
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Machine learning is now a field that is useful in almost every industry. Regardless of what field you are in, having hands-on knowledge of machine learning will help in giving a forward push to your career. That is why it is important to choose among the best of the Data Science course to get the needed help.
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