I want to use this opportunity to thank the entire steemit team for coming up with the steemit crypto academy. Another season has begun and we are set to learn and publish our content as regards the homework given by our professors. Thanks,
@stream4u for the lecture you gave about price forecasting
We all know what price is from our daily purchase of goods/commodities. Price is the amount something is sold. Fore as defined in the dictionary means in front, ahead, and cast means when something is projected to move forward. So from this combination, price forecasting can be said to be the ability to predict the price movement of something (commodity, asset, cryptocurrency, and so on). It uses historical data to estimates and predicts directions. Price prediction can be in two ways. It's either it goes up or comes down. Only stable coins maintain stability, however, there's still a slight fluctuation of few cents
Forecasting is needed in order to know the right time to invest. In cryptocurrency trading, downward movement does not help a trader. that invested when the price of the coin is high. Only bullish light gives the trader profit, so in this case it is important to forecast and know the entry point and once the price goes up from where the trade is entered, a trader can make his profit and keep forecasting using different analysis
Price prediction is important to stay at the profit level in trading. It guides us and makes us invest in assets that have life, and not the ones that would flush investment out to the drain. It helps us to stay afloat in the market. It's all about profit. No one would love to run into a loss. That's why price forecasting is needed
There are different methods used in price prediction or forecasting. We have fundamental analysis, technical analysis, and sentimental analysis. All these can be said to be predictive and descriptive analytics.
Fundamental analysis is used to acess the financial health and the performance of an asset or a company. It deals with using some metrics to investigate the financial liquidity of a particular system. All these can be used to predict the price of an asset or how the project will behave in the future
Let me site an example of fundamental analysis using dollar as a case study
First, the key factors used in fundamental analysis are
- inflation
- credit
- sales
- GDP
- CPI
- Monetary policies and so on
If for instance, Mr. Bob (a trader) uses a fundamental analysis method to determine that the GDP of the united state of America is doing well, he might suggest that the demand for Dollar would increase because when the Gross Domestic Product has substantial growth, it's an indicator of the economy of strength. So more demand for asset/product equals more demand of dollar because people from other countries will buy dollar to purchase asset/product in the US. So if Mr. Bob goes further with his analysis and discover that most people buying from the US are from the UK, he might forecast that British Pounds might fall, so based on this analysis, he might decide to take a position in the market that would benefit him if the analysis turns to be correct. He might start selling pounds and buy dollars. That is how much fundamental analysis can be used to predict the future of an asset
I say that fundamental analysis goes in-depth because you will need to search and get the needed information and economic data before you can make a prediction. Without the right information about an asset, forecasting is not possible when it comes to fundamental analysis
Technical analysis
image source
This is indeed my favorite analysis because everything needed to forecast the price of an asset can be gotten easily, however, not easy if you are not good at reading lines, support and resistance level, candlesticks, relative strength index, moving averages, MACD, ACCI, and so on. Technical analysis looks at the price chart of assets, and these charts are the indicator of the future price of the asset
As I prefer to use technical analysis, some prefer fundamental and there are some that use both to predict the price of an asset. Technical analysis only deals with price patterns and chart analysis while fundamental analysis has to do with macro/micro/geopolitical data. That's why some traders prefer to use both concepts to analyze the future of an asset. They use the fundamental analysis to narrow down their market of interest and use the technical analysis to pinpoint when to enter or exit a trade
As to what method I feel is best for price prediction, I think we all have our area of expertise. While some are good at fundamentals, some are guru in sentimental or technical analysis. What applies to us differs. As I mentioned earlier, I like to use technical analysis but sometimes, I mix it with fundamentals. I would say the best price prediction method is subjected to the person doing the trading
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
Let's look at Polkadot
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I'm starting my analysis based on one week high and low and I'm doing it based on the current price. From the above chart, Polkadot's lowest low was 0.0647, and the highest it went was 0.46419. When I checked other time intervals, I noticed that the lowest low correlates, which means the coin hardly breaks the resistance level. Let me show more graphs.
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For a week now, Polkadot didn't go below $27 and the highest point it reached is $43. This is only one week analysis.
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I also use Stochastics RSI to determine the movement of assets. In the case of Polkadot, I used this tool to determine when there is overbuy and oversell. There is what we call the stochastic oscillator formula. It is used to determine the potential entry and exit point and also price reversals. Every graph ranges from 1 to 100. A reading of 20% or below indicates that the asset is oversold due to the downward movement, and a reading from 80% and above indicates that an asset is over-bought due to the upward movement of the asset. So with this indicator, I could tell when to enter a trade, just as support and resistance help to know when to delve into the market.
Right now, the reading is close to 20% in the graph below, so I can say that there might be an upward movement anytime soon. This is the best time to enter the market. (The red box is where the stochastic RSI graph is located in the image). Polkadot might hit $36 within the week, and if I should forecast for a long period, this cryptocurrency might hit $100. I also used fundamental analysis to analyze polkadot
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Polkadot is an open-source shared multichain network that allows the process of transactions of numerous chains in parallel. It has the ability to combine various blockchain into a single combined network. It allows different blockchains to operate as one. Polkadot has more than 190 projects on it, and it was predicted that it would hit $40 by 2025, and $71 by 2028, but already in 2021, it has hit and surpasses the $40 mark. The aim of the project is to be among the top 3 blockchains, and if we look into their steady growth, they might achieve their aim because of the potential. Polkadot has a lot of supporters on social media and they believe it would wax stronger as every day passes. Apart from the fact that the founders are renowned people in the blockchain tech industry, Dr. Gavin Wood (The most prominent of them all) was Ethereum co-founder. Looking at the fundamental analysis, Polkadot is a cryptocurrency that might hit the $100 mark within the next 8 months.
In conclusion, forecasting is not something of certainty. We only gather evidence and some facts that we believe might be the reason for an asset to go bullish or bearish using various indicators. I want to use this medium to appreciate our prof @stream4u for taking us through the forecasting course. It's very much educative. Let's keep using the method we know to forecast and keep trading. Thanks for your support.
CC
@steemcurator01
@steemcurator02
@stream4u
@tralfager
Hi @ckole
Thank you for joining The Steemit Crypto Academy Courses and participated in the Week 10 Homework Task.
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@stream4u
Crypto Professors : Steemit Crypto Academy
Thanks for the feedback prof. I appreciate you. Going further, I will stick my name to any image that is mine. You are indeed wonderful. My best regards prof. I will keep following.
Thanks @steemcurator02