fred rosenberger wrote:One thing to consider is that <today's price> is not simply a function of <previous prices>.
Or, as they say in the industry when they're trying to sell you something:
Past Performance is not an indicator of Future Results.
The process of attempting to predict stock price trends based on past history is called Technical Analysis and they have a whole raft of different terms for different graph profiles. But Technical Analysis is really only good for trying to respond to the trading
patterns of other Technical Analysts. As Fred has said, a lot of non-technical factors also affect share prices.
In any event, automated short-term trading isn't something that's very useful for personal investors. The only way to make money doing that is to trade enough that small changes in share value add up to large totals. It's essentially a zero-sum game, however, allowing for overall market gains and losses.
It's pretty well accepted that if you want to make serious money you buy and hold for extended periods of time, which is what Warren Buffet does. Also know what you're buying, what your goals are, and where your purchases are likely to take you.
I paid off my house because I bought Cisco stock back when the Internet was beginning to expand. I didn't get it at the IPO or at some magic time where it was poised to take off, I bought it when I had money and it looked good. I sold it when I saw that the share growth pattern had levelled off. In the case of Red Hat I bought as soon after the IPO as I could and held it until IBM bought them out last year.
In neither case was I a financial genius. Rather, being someone who works in the industry, I looked for solid companies with a growth future and relied on my daily knowledge of what they were actually doing with customers - and planning to do - to determine whether to hold or sell. I didn't go with the front-line big names, although that does mean I missed out on Google and Amazon. I made the mistake of selling Apple - right before Steve Jobs returned. Ooops. But overall, it has done well. That kind of stuff is kind of hard to plug into a mathematical model, though.
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