Crypto Academy Week 10 - Homework Post for @stream4u | All About Price Forecasting

It's an honor to be present here again to submit another task's solution after learning from the crypto professor @stream4u. In this piece, I'm going to talk about price forecasting.

Basically, price forecasting is the process by which the in the nearest future (which could be in a few days, weeks, months, years...) of a crypto asset is predicted after considering a lot of factors. In other words, price forecasting is a very important tool used to make predictions as regards the future price of an asset in either trend (uptrend/downtrend) to make a wise trading/investment decision (buy/sell).

In price forecasting, you take into consideration a few factors like the fundamental analysis which is done checking through the performance of an asset's company, technical analysis which involves using indicators to check the price behavior of an asset in the past and the present time (support and resistance are greatly involved) to predict the trend of an asset in the nearest future and sentimental analysis which comes with what you have heard from other people and use that to predict the price of an asset in the soonest time.

The importance of price forecasting can't be overlooked as it allows investors or traders to take advantage of the crypto market to maximize their chances of making good profits. Price forecasting can benefit a trader or investor not only when the market is bullish but also when it's bearish.

Take, for instance, if you base your price forecasting on technical analysis having drawn your support from the past price history of that particular asset, you can be prepared to position yourself for a buy order and also prepare to sell at an already drawn resistance line (provided there is no price breakout). If you eventually sold at that resistance, you can also position yourself for another buy after making a profit from the first one.

In short, price forecasting helps you utilize the opportunities in an asset trading/investing having properly carried out your analysis to predict the price of an asset.

The methods used for price forecasting as I have mentioned earlier are; technical analysis, fundamental analysis, and sentimental analysis. These three methods are very important but I choose to use technical analysis and fundamental analysis, nevertheless, I will speak about the three.

Technical Analysis: This is an important tool that can be used for price forecasting of an asset which includes considering the price behavior of an asset over time, the current price of such asset, the price-performance towards either trend (uptrend/downtrend), also using the chart pattern utilizing support and resistance to project entry and exit positions and so many other factors. Remember, we have different indicators that can be of help in technical analysis, choose the one that best works for you as the purpose is to predict the price of an asset and maximize the profits from investments.

Fundamental analysis: Fundamental analysis as used in price forecasting goes beyond comparing mere past and present price of an asset rather goes deeper into checking the performance of the asset's company, reading the asset's whitepaper to see what the asset's team put down and compare it to the current performance of the crypto asset. Also, a price forecasting based on fundamental analysis requires going through the company's financial status, their asset's market supply, the aim of the project, and how it is working to see if the aim is in alignment with the current performance of the asset and this could serve as a good tool to effectively predict the price of the asset in the soonest time which could be bullish or bearish.

Sentimental analysis: Another one is the sentimental analysis which I can say it's developed from assumptions from different people in the crypto world. Sometimes, traders in possession of an asset can tell it in public that the asset is going to do well, come to think of it, when you are holding an asset you will surely want it to rise and people like this are sentiment about their forecast. Other users searching for information about an asset can find such analysis/assumptions on blogs, social media, news, friend's advice, and many more. Note that, it could be effective to predict or forecast the price of an asset but one should be aware it's not always true as it comes with flaws too, which means it could be true or false.

I will be showing how to use chart pattern to predict the price of an asset to make a good investment decision and for this purpose, I will be using the chart pattern of Binance Coin which means, BNB/USD pair. The steps are given below; Note: I used TradingView to access the chart patterns.

From the screenshot above, as seen from the first support and the price of the asset goes uptrend and on its way downtrend, it hit the first support line again and it head the uptrend way again (reversal pattern). So, the first and second support line from the chart is 506 USD, and the support turns to resistance a few days later.

I caught two supports at the bottom when the price of the asset was equivalent to 462 USD and positioned myself for a buy as I await to make the resistance line (506 USD) as my take profit target. I bought the asset and await if the trend goes as projected with my technical analysis.

The screenshot above revealed that a price breakout was experienced as the price moved above the resistance line and up to 540 USD, thereby creating a new high above the resistance line (506 USD) and it was resisted after that, paving way for another resistance line. I can consider entering the trade again once I realize another set of supports to be so sure of what I am going into.

In conclusion, price forecasting of an asset is very important as it helps you to project a way to maximally take profit from the asset's market provided you are accurate enough with your prediction and it doesn't matter the methods you choose to use, it's only important to be sure of what you are doing. Technical analysis works well for me and it can work for you too or others can. This lecture is a great one from professor @stream4u and I say thank you, sir.