Probabilities of the future state depends on the current state. Tomorrow probabilities depend on today.

+ - Next Day possibility from + day : transition matrix

+  Next Day possibility – day

 Markov analysis is a method used to forecast the value of a variable

whose predicted value is influenced only by its current state.
 The primary advantages of Markov analysis are simplicity and out-of-
sample forecasting accuracy.
 Markov analysis is not very useful for explaining events, and it cannot
be the true model of the underlying situation in most cases.
  Markov analysis is useful for financial speculators, especially
momentum investors

A Markov chain is a mathematical tool used in stock prediction that relies on the idea of
a memoryless process, where future stock market conditions depend solely on the
current state. It involves:

1. States: Different market conditions or price levels are represented as discrete

states, like "bullish" or "bearish."
 2. Transitions: Transitions between states are determined by probabilities, indicating
the likelihood of moving from one state to another.
3. Prediction: By studying historical data and estimating transition probabilities,
Markov chain models can make short-term predictions about future market
states, such as the likelihood of a bullish or bearish market.
4. Limitations: Markov chains assume that the future depends only on the present
state and do not consider past states, which might not capture all market
complexities, like long-term trends or external events.
5. Applications: Markov chains are useful for short-term stock market analysis,
including trend identification, volatility forecasting, and risk management.

In summary, Markov chain models offer a simplified framework for understanding and
predicting stock market behavior in the short term, but for more accurate and
comprehensive predictions, other factors and models may be necessary.