Steemit Crypto Academy Season 2 Week 2 Homework Post for @stream4u

Introduction.

Hello fellow steemians, this week's lecture was on price forcasting and I would like to answer the questions to the homework task.

What is price forecasting?.

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Forecasting is the act of predicting trends relying on data or information from the past and present.

Therefore price forecasting is the act or process of predicting the trend in products like the rise and fall in cryptocurrencies. This is based on various factors like demand, prices of other products and many others.

Why price forecasting is needed?

Price forecasting has proven to be very helpful and hence has a lot of benefits.
Below are reasons why price prediction is needed;

Price forcasting helps in the prediction of price fall or rise which generally affects costumer demand and hence helps to venture into business at the right time. For example, cryptos like bitcoins are expensive and hence when I want to trade or buy in BTC, I would have to effectively price forcast. The best time to buy a BTC is when it's price is down so that when it rises, I can sell and make profit.

Effective price forcast helps us to know if we should venture into a particular business long-term or short-term. This helps us to not waste too much time in a venture that will not fetch a lot of profit. If you effectively price forcast, you know whether to stay in that venture for just a couple of months or to stay for years. This helps in setting goals in life.

Price forcasting helps anticipate changes in the market setting. Since you have access to both past and present data when you price forcast, this data can help inform you on the trend if the commodity you want to venture into to. For example, you know bitcoins are unstable and as such it's price can rise and fall at anytime. So when you price forcast, you can predict it's pattern and as such anticipate the value it will have in weeks or months.

Effective price forcasting also aids in making budgets. Let's say I want to buy a bitcoin but due to its expensive cost, I would need a lot of cash preferably one that wouldnt have negative effects on my budget. So if I plan to buy in a particular year, I can prove forcast and if it suits me, I would make way for the purchase of that bitcoin in my budget. This helps in making budgets and as a result one doesn't use monies they can't afford to lose.

All the reasons above show why price forecasting is very much needed.

What methods do you feel are best for price forcasting?

There are three main methods in price forcasting. These include technical, fundamental and sentimental analysis.

Technical analysis.

In technical forcasting, analysts known as technical analysts study price patterns and movements of a past data. There are 5 other methods used in technical analysis and this includes; bearish engulfing pattern, the false breakout, bulish engulfing pattern, bearish diverging signal and bullish diverging signal.

This method is done using charts of market data. Studying of the price patterns helps to understand price and volume trends while identifying trading ventures.

Fundamental analysis.

In this kind of analysis, the analyst does not look at current market trends but just looks at how well a company is doing. This is done by making market analysis, financial analysis, formulation of security value, predicting worthy pay offs of the company and making meaningful suggestions and advice to an investor. The analyst compares current value of market stocks to see if his measured market analysis is under or overvalued.

Sentimental analysis.

In sentimental analysis, the analyst does his analysis by listening to the media, reading news and articles and also waiting for nervy situations in the public. These nervy public situations result in increased price volatility. The analyst in this form of analysis interviews people on a brand or product of interest and ask them for both negative, neutral and positive details including customer experiences. This helps the investor to make profit in good spaces of time.

All three analysis are good and choosing one will depend on the individuals preferences like time and tolerance of risk, among others.

But I think the technical analysis is the best method for price forcasting. This is because it is a short term approach, involves studying price movements, studying both past and present trends and also involves finding the exact time to start or withdraw investment. Whereas the other two use long term approach, deals with company data and obtaining information from outsiders, does not use charts among others.

Using a crypto asset graph to predict it's future price.

For this purpose of this task, I would be making a prediction on the price of bitcoin using the technical analysis. My reasons for choosing the technical analysis has already been explained in my answer to question 3.

The 2 lines keep the movement of the piece within a range for a particular period until there's a break.

There are 2 important terms in forcasting using the chart. These are resistance and supporting line.

Resistance line is the lower level of the trend or chart. When there's a break in the resistance line, it's time to buy and when there's a break in the supporting line, it's time to sell. The supporting line is the upper or peak level of the trend.

Above the resistance line means it's time to buy. The break signifies a new support line.

When it breaks the bottom line, it's time to sell. And the support line becomes the resistance line.

We realise in the chart of bitcoin above that the price of bitcoin one year ago( May 2020) was $10 000. This amount is it's supporting line. The price of bitcoin moved steadily little above $2000 till it broke it's resistance line and achieved above $45 000. At this point, investors would have been eager to sell which is quite advisable as we're not 100% sure what would happen. But those that kept their coin will have received more interest than those that sold since it continued increasing.
This means there could be a stable rise in the price of bitcoin in the next months or years from after 2020.

Conclusion.

I have learnt and discussed what price forcasting is, it's importance and how to predict the price of an asset using the technical method. The method to use in prediction as stated already, depends on the investor.
I would say a big thank you to prof @steam4u for this informative lecture.