- Price Forecasting Notion
- Need of Price Prediction
- What sort of analysis required for price forecasting?
- Suitable methods for Price forecasting/Prediction
Here I am going to elaborate my homework task assigned by the professor @stream4u.
Price forecasting means to predict the future trend of price on the basis of historical data or by applying some technical techniques.
Basically, forecasting of price helps a lot in trading or investing in any asset. It helps in determining the direction of price whether it will go up or down in near future. The price can be predicted from a shorter time span to a longer time frame i.e. from Minutes to hours and weeks to months and years.
Generally, the traders use the following methods for the forecasting of price.
- Fundamental Analysis
- Technical Analysis
- Sentimental Analysis
It measures the strength of a financial asset on the basis of its fundamentals. For instance, the trader investigates the market supply of financial asset, their use cases, the number of users behind the assets and the team working managing the project, market economic conditions. No doubt, Debt-To- Equity ratio is also an integral part of fundamental analysis.
The traders forecast the price of financial assets or digital currencies/coins by using patterns of candlesticks, charts, indicators and oscillators like RSI, MACD, Bollinger bands etc., dynamic support and resistance and historical movement.
Sometimes, we observe that News about coins, social media and some influential personalities drive the market sentiments. Often, we noticed that price of a coin move very fast in either direction, i.e. up or down. Its because of the news related to concerned coins, social media trends and interference by some influential personalities like Jhon Macafee and Elon Musk had been posting about coins to pump or dump the price of coins in recent past. If one wants rapid profit or otherwise in crypto market, one must have a close eye on high alert news, tweets by the influential personalities especially.
The price forecasting is necessary for precise decision-making and to minimize the risk involved in taking the position on any cryptocurrency. Normally, the trader in crypto market tries to earn some quick profit and jump into the buy without forecasting / analyzing the coins and ultimately they hit with the loss. Relevant to this, some traders buy the coins and hold them for long period. So the forecasting is needed to;
- Minimize the risk involved in buying any financial asset/coins.
- Take precise entry and safe exit at the right times.
- Generate return/profit
- Manage the risk/reward involved in any coin to which one is going to take entry.
- Take more positions after a safe exit from a trade.
3- What Methods are best you feel for price Prediction/Forecasting?
All the aforesaid methods of price forecasting have their own insights but the best one I thought is the technical analysis method because the technical analysis helps in predicting the price changes by reading the charts, candlestick patterns from short to medium time span.
whereas the fundamental analysis helps to enhance the confidence of traders in the long run after getting through the core values and the financial structure of the asset/coins.
The technical analysis method helps in driving the value on the basis of real-time movement of price and volume. After taking precise entry and safe exit on the basis of technicals, more trades can be taken to increase the reward. The technical analysis helps in reducing stress and controlling emotions attached with taking of trade and ultimately boost confidence.
4- Take any Crypto Asset Chart graph and explain how to do Price Forecasting? OR Take any Crypto Assets Chart graph & as per its current price tell us what will be its future price for next 1 week or 1 month? You can predict for any direction up or down but explain it properly on what basis you have predicted the price.
In response to this, I have chosen the ETH coin. Here I elaborated how the simple support and resistance levels worked on ETH on 1 hour time frame.
image source: chart created on trading view
After getting liquidity from the support zone, price goes up and then retest the resistance level and then break out happened.
Image source: chart created on trading view
Check at daily time frame, the price is heading towards the price mark $3000 after getting retested near price level
It is concluded that price forecasting is the way of predicting the price by using fundamental, technical and sentimental analysis in order make precise decision as well as to increase the reward ratio.
on the basis of these, I have forecasted the price of ETHUSDT after a month around $3000 as depicted in my charts based on technical analysis.
Thanks in anticipation to @stream4u for providing me the opportunity to submit my task.