Chingo De Dinero

So…the first thing that you need to know when investing is how do stocks move….can you look at charts and predict movements….what makes them go up or down.  The movement of stocks is best described, in my opinion, by the weiner process.  The Weiner Process can get pretty complicated, but you really do not need to totally understand it, just have a feel of what it means.  It is a continuous time stocastic process (stocastic=random).  So, what I am saying is stocks are totally random from one second to the next, also described as a random walk, this was popular in a book a few years ago “Random Walk Down Wall Street“.  Also, this is ingrained in the idea of an “Efficient Market”.

Alright, so I said a bunch of stuff above, but to get to the point, stocks move in a random way, based on new news (White noise when modeling).  So…the only to know where a stock will go one second from now is to know the future.  No need to look at charts, or any trends, it is all random.  But, I will contradict myself and say that you can swing the odds a little in your favor if you do your homework and stick to certain principles.