How Data Analytics can Decode Stock Market?

How Data Analytics can Decode Stock Market?

By Capital Markets CIO Outlook | Thursday, October 24, 2019

Data analytics must essentially be considered by those who are eyeing to invest in stock markets.

FREMONT, CA: The stock market is the source of curiosity and suspicion for many. Even those who wish to invest are often too scared as there is always a potential threat of losing money. While it’s true that stock market investment carries risk, but when backed with data and analytics, it can be one of the simplest ways to build wealth. While the process of buying a stock seems challenging, selling stock may seem daunting. However, the current technological advancements offer various tools and applications to analyze and understand stock market trading. Data analytics can be especially useful while dealing with the stock market.

Industries are increasingly moving to data analytics for formulating stock market strategies. The extremely dynamic nature of the stock market demands the investors to keep track of a large number of data. Data analytics enables useful insights to investors while utilizing smart algorithmic trading. Earlier, the investors relied on market trends and intuitive means to make decisions in stock market trading. It was not only irrational but also resulted in unwanted outcomes. However, data analytics considers a wide array of market data and offers relevant suggestions to investors. Thus can be minimized with the help of data analytics in stock transactions.   

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Several factors affect the decision-making of an individual who invests in stock market transactions. Factors such as fear, greed, overconfidence, and advice from self-proclaimed investment experts can result in disastrous outcomes for the investors. Instead of looking for short term gains, investors need to think in terms of long-term profits. When a stock’s value crashes, investors try to sell their stocks in a panic. However, it is better to look for the factors that are affecting the stock’s prices. Data analytics can be a useful tool in this case too. Algorithm trading is one such application that employs computer programs resulting in high-speed trades depending on the number of criteria such as stock prices or any other market constraint. The real-time data allows the investors or the stock trading firms to improve upon their decisions.

Data analytics also offers a better estimation of returns and outcomes. A relevant data analytics tool offers deeper insights, such as the probable scenarios and risks involved with a particular stock. Data analytics may also reveal the hidden patterns that can lead to a better understanding of how the prices of a particular stock may fare in the future. Based on various perspectives gained via data analytics tools, an investor can make better decisions while trading in the stock market. Further, data analytics, coupled with technologies such as machine learning (ML) and predictive analytics, can drive stock market decisions based on facts and data insights rather than intuition and guesswork. Logical decisions will enable the stock market firms and investors to fare well against their counterparts.

Thus, data analytics has immense potential for the investors as it will enable them not only to understand but also to identify the opportunities that are critical to success in the stock market. A data-driven approach is much safer than an intuitive approach in stocks, especially as the market is highly dynamic.


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