What Bell Curve Represents in the Stock Trading and Investment World

Bell curve is one of the terminologies used in stock trading and investment world. The most probable event is indicated on the top of the bell, or the highest point in the curve. The entire likely occurrences are distributed equally or evenly within the most probable event, and this in turn generates a downward-sloping line on both sides of the peak; it simply means each side of the peak features a downward-sloping line. The Bell curve is a great way to assess stock trading risk in a long term.

In many research areas where analysis of set of data is involved, the bell curve would usually come into play. More importantly as it relates to stock trading and investing, the bell curve is commonly employed in representing or indicating asset class returns as well as their distribution patterns.

The Bell Curve Chart Culled from Investopedia.com

The figure above is a representation of a normal distribution bell curve. The plotting in the middle represents the arithmetic average or mean, which sets out standard deviation to any of the sides. For the bell curve graph shown above, the mean value is 0 (zero), while the standard deviation is 1percent. You can as well call it a standard normal distribution. Although this may not usually be the case in the real world, it is user-friendly for illustrative purposes.

]]>Bar Chart is the most popular chart pattern used in carrying out technical analysis. The visual or graphical representation of price activity within a certain time frame is engaged in spotting trends and patterns.

Stock Trading Bar Chart Culled from Investopedia.Com

The additional major pieces of info inputted to each data point made the bar chart to expand on the line chart. There are series of vertical lines in the chart representing each data point. The vertical line indicates the low and high for the trading period under review, including the price that closes the period. The horizontal dash indicates the close and open on the vertical line. The dash placed on the left side of the vertical line illustrates the opening price. On the other hand, the dash on the right side indicates the close.

Normally, if the open (represented by the left dash) is lower in comparison with the close (represented by the right dash), the shading of the bar will be with black color to indicate an appreciation (up) period for the stock; in essence, the stock has appreciated. Red-colored bar is an indication that the stock’s value has depreciated within the period under review. In this case, the close (represented by the right-side dash) is lower in comparison with the open (represented by the left-side dash).

]]>Arithmetic Mean as It Applies to Stock Trading and Investing

Let’s assume you want to find out the arithmetic mean of the closing price of a stock for the previous week. This is how it works; using these closing prices $14.00, $15.50, $15.20, $14.80, and $14.50 for each of the five days of the week, the arithmetic mean for the closing price would be computed as the sum of the five different closing prices above, divided by five (which is $74/5 = $14.80)

Getting to Know How Much Your Investment is Worth

How much exactly are you getting as returns from your investment? You should bear in mind that the method or system used in computing your investment returns matters. So, why does the method of calculation matter? Keep reading to learn more…

Would you prefer to earn 9 percent or 10 percent as your annual investment returns? Obviously, anyone would opt for the higher percentage earning which in this case is 10 percent, all things being equal. However, when annual investment returns calculation is involved, all things cease to be equal. And, the difference between the methods of investment calculations can generate remarkable dissimilarities overtime.

When it comes to arithmetic mean or average in the investment world, the geometric mean/average is one of the excellent methods of unfolding investment returns reality. Also known as compound average, the geometric average is a great way to mirror the real economic reality of an investment decision. Profound insight into your investment performance measurement and evaluation is the best way to know your financial stewardship capability, and would at the same time aid you in assessing your broker’s skill more competently.

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