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Ask HN: Any recommended resources to learn market analysis?
162 points by febin on May 15, 2018 | hide | past | favorite | 36 comments

Most people are responding to the trading-related side of the coin, so I'll offer some advice on analyzing a market for the purpose of building a startup.

It's quite hard to find good resources on the internet for this purpose; what helped me was scouring Wikipedia [1] for the buzzwords (check out 'see also') and searching on Google if necessary beyond that. There's also lots of free lectures from places like KhanAcademy or Coursera that likely cover these parts of business.

One small tip my cofounder learned in business school: I don't remember the exact terminology, but analyses that go from the inside outwards are more respected by investors than ones that go from the outside inwards. Don't take huge figures like "Number of Americans" and multiply by "Percent of Americans that do 'x'", but rather find localized, small figures, and extrapolate those up/outwards.

[1] https://en.wikipedia.org/wiki/Total_addressable_market https://en.wikipedia.org/wiki/Market_segmentation https://en.wikipedia.org/wiki/Target_market

You probably meant top-down vs bottom-up.

An example of top-down analysis is to go to e.g. Gartner or similar research firms and read that they estimate the ridesharing market to be say $100B.

An example of bottom-up is to say, based on data from this and this article or data source, we estimate there are 1M cars doing ridesharing every year in the US. We will sell each of them a gadget for $10 so our market is $10M if we capture all of it.

Yes, that's exactly what I was trying to get at. Thanks for the clarification!

I'll second this. Wikipedia is a great resource for this stuff.

Also, check out some of the common frameworks like Porter's 5 Forces, SWAT analysis, BCG Growth-Share matrix, and the GE-McKinsey matrix. There are a lot of free educational materials on these. I'd take it slow and steady, and try to focus on orienting your thinking to the questions asked by these frameworks.

Also, consider reading the Form 10Ks for some companies whose products you like. They have a section where they explain their market and their role in it.

Good luck!

Seconding the 10K readings! You don't have to read the entire thing, usually just Part 1. Part 2 and Part 3 still have good stuff, you just have to read a lot more to find the gems.

> One small tip my cofounder learned in business school: I don't remember the exact terminology, but analyses that go from the inside outwards are more respected by investors than ones that go from the outside inwards. Don't take huge figures like "Number of Americans" and multiply by "Percent of Americans that do 'x'", but rather find localized, small figures, and extrapolate those up/outwards.

Not sure if it could be considered the same, but in physics there's a concept of "from first principles" where you obtain something starting from laws which you know are true (within the domain of applicability of a theory). "From first principles" is in contrast to making comparisons for example reasonings like "I know the answer in that other situation, so in my situation of interest I'm going to estimate the answer is X% more".

Calculations from first principles are tipically more robust but harder to do.

According to BayStartUp (they support startups in Germany), they advise you to do both top-down and bottom-up: This way you can validate the results from the extrapolation.

Yes - The Art and Science of Technical Analysis by Adam Grimes is fantastic.

Typically these kinds of books take one of two extremes:

1. Markets are psychology and TA patterns will unlock profits


2. Markets are mathematics and algorithms will unlock profits

Books in #1 will tell you all about Ichimoku clouds, fibonacci levels, fractal patterns, and how to read tea leaves.

Books in #2 tend to ignore the (real) psychological aspects of trading and don't give you much edge beyond a random walk.

Grimes book holds a special place in this dynamic: He discusses price action as psychology, but applies statistical tests to common trader folklore.

As a programmer and beginning trader/quant, Grimes book was exactly what I was looking for.

I've skimmed through Grimes' book a little and liked what I saw. I've independently taken a similar approach to TA and it has mostly worked out well for me.

My personal take on TA is that Markets are psychology and TA is a slowly evolved form of feature engineering that has been finely tuned to be used by the most advanced visual pattern recognition algorithm we have, our brains. Many of these features can be tested and proven statistically, but they require additional feature engineering work to convert them from their visual pattern recognition purpose into something more suited to statistical inference. And just like any form of feature engineering, a lot of it doesn't work, but when you find what does work, it's pretty awesome.

Without knowing any more about what you are trying to do, I would just recommend a framework we learned at business school that I keep coming back to. It's for when you're looking at developing or altering a product. It's really just a checklist, and it's super simple, but it's effective. Can be tweaked to understand how different brands are attacking a market.

5Cs, STP, 4Ps

5Cs: Just list out a bunch of facts to get acquainted - Context: what are the wider trends (e.g. millennial habits, etc.). This is where you start wide

- Customer: what 'job' is your customer trying to do? Who could that be? What is your unit of analysis: a person, an occasion, a ___ ??

- Company: what are you good at?

- Competitors: Who else is trying to serve that job?

- Collaborators: Who could be a partner? (Vendor, complementary service, channel partner, etc.)


- Segmentation: What are the different customer segments? What are the dimensions that make two {people, occasions, etc.} different in a meaningful way

- Targeting: Which are the viable and nonviable segments? Who's your target?

- Positioning: What is your:

-- POP/POD: point of parity/point of difference

-- Frame of reference: who are you stealing share from?

-- Reasons to believe: why would someone believe that you can deliver?

4Ps/marketing mix:

- Product/brand: what is your product? what's it's functionality? what's your brand?

- Price: level and structure.

- Place: distribution channels. Pull vs. push.

- Promotion: where will you advertise? What's your message?

I'd steer clear of it. Market analysis doesn't work on a risk-adjusted basis. I'd recommend reading any of William Bernstein's books for a good intro to passive, indexed investing.

I'm guessing OP is asking about market analysis in terms of evaluating whether a business idea is good (or not), not market analysis for investing. E.g. what is the market for X product (units and revenue), who are the competitors, what is the profitability X product can achieve if it meets its goals, etc., etc.

Yes please! Even if that's not what the OP was asking about, it's what I'm interested in and why I clicked on this link, so I'm hoping there are some answers to that question (which I don't think has been answered here yet).

yeah OP is not clear. When a finance person sees market analysis, it’s a specific thing: evaluating whether financial market pricing is correct or not.

Ah, okay, my bad then.

You could do a lot worse than reading all of Ben Thompson's core articles on Stratechery:


I've found his Aggregation Theory to be a very useful lens to understand the largest tech companies. Arguably this particular theory isn't as useful if you're trying to find a niche to start your own company, but he explains a lot of his working in a way that I feel is transferrable/generalizable.

I don't think this Ask is a question about the financial markets, trading, or investing, but rather about general analysis of a potential market for a particular business.

are you referring to trading or are you referring to "market research"

Yeah, I was confused about that as well. I came to the comments hoping to find good suggestions for doing market research. Most of the comments (at least at this point) seem to be geared towards trading.

Best to stick with picking companies based on fundamental analysis and some insight on their competitive advantage, value proposition, company culture, etc. Trading based on price alone amounts to little more than gambling, because it’s impossible to time the market’s cycles in the long run.

Talking with a few NY traders I was told that they may use Technical Analysis Theory as a secondary framework to see what is going on just because if enough trades are made following these rules, the prices will follow the TA rules. TA is heavily relaying on human psychology.

These traders also told me that do not know anybody at the trading desk that has not quickly felt out of love for TA.

TA will work when nothing major is affecting the market.

Special events will affect the price is a way that TA cannot predict. Who has enough money or influence can also manipulate the prices. Changes in fundamentals can also affect the price in a way that TA cannot predict.

Before studying market analysis you should get a really firm grasp on statistics. In particular, you need to know how to calculate the probability of obtaining a false positive when testing a hypothesis, and then apply that understanding to any market strategy you wish to undertake. With modern computers and ready access to data, it is incredibly easy to fool yourself into thinking you have found a reliable way to beat the market when in fact all you've done is stumbled on a statistical fluke. Test enough strategies against enough data and finding such flukes is inevitable.

I'd be really interested if anyone has a book or similar on supply and demand curves estimation by experiment. Ideally I'm looking for a cookbook type book less so than a theory book.

If you're referring to financial markets, I personally learned a lot from Trading and Exchanges: Market Microstructure for Practitioners, although I didn't finish it. But it explains the basic characteristics of financial markets, and why they are set up the way they are. It isn't necessarily going to be obvious and financial markets are based on hundreds of years of accumulated knowledge.

I was just yesterday considering writing an essay on Market Analysis (with the intention of creating a startup or otherwise trying to produce something of value for a market).

There's many ways to approach market analysis and taking it all in at once can be overwhelming, with "Analysis Paralysis" quick to set in.

I'll follow through and write/dump in an article all I know based on my experience and books I've read if anyone is interested.

I certainly am interested!

To understand the market better I would recommend learning much more than just about the market. Knowing and understanding what is going on macroeconomically and geopolitically will help you in the market place. E.g.



You didn't use the term stock market, so I am assuming you mean market research.

One of the ways people do their research is by creating a landing page and driving traffic via google/facebook/linkedin ads. The amount of signups for beta is supposed to be an indicator of the product's demand.

I have read financial books, got an MBA, worked in Finance. Read more books.

~70% in 2012 of the market trades on computers/algorithms.

I recommend reading some finance books, but at the end of the day, you probably going to want start to build a financial trading algorithm.

I recommend Black Swan or Fooled by Randomness

2 great books for thinking about market opportunities:

Blue Ocean Strategy

Thinking in New Boxes: A New Paradigm for Business Creativity

Both aren’t entirely scientific and obviously downplays the effort to make success happen, the theories are quite interesting and applicable.

I wrote a short and incomplete guide to market analysis from the quant/programming side. https://tradedefender.com/news/10

I'd recommend going through a good university's economics textbook and doing all the exercises. It's much easier to beat the market by fundamentals than by technical analysis, though a knowledge of both are important.

My website (beta) teaches analysis with Excel the way that is done by hedge funds / asset managers http://www.shortcutinsider.com

by market analysis I'll assume you mean technical analysis

I recommend 'A new trading for a living'. Great intro to trader psychology and non-BS technical indicators

You should change the title of this to "market research" which resonates more with researching the market for researching a startup.

They say that Warren Buffet's favorite book is The Intelligent Investor by Benjamin Graham.

Valuation by McKinsey

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