STEEM CRYPTO ACADEMY SEASON 2, WEEK 10 HOME WORK POST FOR @stream4u – PRICE FORECASTING; PURPOSE AND METHODS

Thank you so much professor @stream4u for the lesson. It was helpful. Below is my homework post for this week.

1. INTRODUCTION - PRICE FORECASTING

Price forecasting refers to the prediction of the future price of an asset in order to take long-term and short-term invesment decisions. This prediction is often done based on the seasonal trend of the asset, its current price or status, its past performance, the news about the asset, etc. It is basically trying to determine if the value of an asset will increase or reduce, and the extent to which such increase or decrease will be effected.

These analyses can be done through Technical, Fundamental and sentimental methods.

Image source

2. WHY IS PRICE FORECASTING NEEDED?

Price prediction helps traders or investors in deciding when to make an entry into the market as well as the time to exit.

As we all know, the market place isn't all rosy at all times hence it is important to make use of the resistance and support in the case of a technical analysis to determine when to buy, when to sell, when to go long or short.

Also, price forecasting is needed in order to reduce volatility and the risk of losing all Investments in a jiffy.

Instead of waiting for an increase or decrease in price in order to effect buying or selling, price forecasting can be used to perform multiple trades with multiple time chart.

3. METHODS OF PRICE FORECASTINGü

As stated earlier, price could be forecasted using Technical analysis, Fundamental analysis or sentimental analysis. Let's look into each of them and understand what they mean.

TECHNICAL ANALYSIS

As taught in previous lessons, Technical analysis is the act of using price chart, market trend, support and resistance, moving average, etc to determine the probable performance of an asset in future. This Technical analysis can help the trader to buy at support level and sell at the resistance level as the price moves.

FUNDAMENTAL ANALYSIS

Here, the investor doesn't need a moving average or price chart to predict price. Rather, the trader will assess the financial statement of the company; income statement and statement of profit or loss account, the company's performance, the management team and performance, the new products that are introduced, market supply of the company's product, company's reputation, etc.

Once the company is doing well in these aspects, the investor would invest in the company. The current market trend and price chart is irrelevant.

SENTIMENTAL ANALYSIS:

In sentimental analysis, the trader or investor looks into the news, rumors and the view of the media to determine how volatile the market will be. Positive views will boost the performance of such asset and vice versa.

Image

THE BEST METHOD OF PRICE FORECASTING

In my views, I prefer the Technical analysis to any other method. Reason being that in technical analysis, the investor is using the actual performance of that asset to predict the likelihood that the market would do better or go worse.

There is also a high chances that such prediction will come to play being that it happened in the past.

4. USING A CHART TO EXPLAIN PRICE PREDICTION

The above chart shows the movement of the price of BTC to USD Tether. Following from the above chart, it can be seen that the price started witnessing a significant increase from October, 2020 and it kept moving from 12,000 to somewhere between 40,000 and 44,000 in February 2021.

This point formed a new support and the price still moved up to 56,100. From this point, the price started witnessing some upheavals and a new resistance formed in April 2021 as the price hit 64,945.22.

Looking at this chart, prediction can be done using technical analysis, based on the fact that the price always rise and fall, this fall will be followed by another increase that will surpass the previous price level.

CONCLUSION

Price prediction is important for every investor. It helps the investor to make some investment decisions as well as decide when to enter or exit the market. Prediction can be done in different ways depending on which one the investor deems fit for him or her. Technical analysis will help the trader study price chart of different times and then predict based on the outcomes. A watchlist could also be set to study the performance of various assets.

Thank you so much for having me here! I really appreciate.

Cc:
@steemitblog
@steemcurator01
@steemcurator02
@stream4u