RE: Playing with numbers (in a good way).
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In stocks, what's essentially being discussed in the market through price is the future. If you think about it, the discussion isn't about reality. You see this when companies release their financial statements. If the numbers significantly exceeded market expectations, the company's stock price rises sharply. If the numbers were poor and far from what the market expected, the stock price falls sharply.
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The stock market can be irrational. The stock market is often times irrational longer than people can remain solvent. This is why making aggressive bets based on a DCF or a multiple valuation tend to not be good long term strategies.
In stocks, the valuation is based on the assumptions of what will happen in the future. Assumptions are inherently subjective but should be based on reality. Also, sentiment does impact stocks too, it is just not the driving factor for a long-term valuation.
Stock prices may drop sharply at times but that sharp decline is typically unfelt by a CRYPTO trader that is looking for massive price swings 😅
Many people buy and sell stocks based solely on charts and don't see the balance in their lives. How each person invests is their own business. But the future is discussed through price. The past is gone, and the present lasts only an instant. The stock market is based on pure expectations.
I agree. That is why technical analysis is not recommended in this community. Actual value of a business vs where we think a line will go are very different "ideas."
Agreed. I encourage people to only use this TradFi Community for research and not to view it as a guaranteed path for success.
IMO the "stock market's value" is based on both mathematics and psychology. The weighted impact of mathematics and the weighted impact of psychology seems to change overtime. I am not sure what causes that change.