Hello Professor @stream4u,
My thanks to you for the beautiful lecture delivered on Price Forecasting. I actually learned a lot about forecasting through this lecture. The below is my presentation of the homework task
What Is Price Forecasting?
The term Price Forecasting refers to the prediction of the price of a particular product assessing its demand, features, seasonal changes, as well as the price of other products among others. In all economies of the world price determination of commodities plays a major role. Price has a big influence on an industry’s future, as such, it is one of the key determinants of the competitiveness of the industry. Price forecasting is governed by demand and supply. This is because any amount you set for a price is dictated by demand and supply. Price forecasters could be likened to weather professionals. They use the tools of demand and supply to make accurate and timely decisions.
Discuss why Price Forecasting is needed?
Price forecasting is important to business firms because it gives them the capability to make informed decisions and also develop data-driven strategies. With this financial and functional decisions are taken based on current market conditions and predictions on how the future looks. Price forecasting is good for businesses in the following ways;
- It helps businesses to make a good allocation of their budgets and also the adequate amount of time needed to spend on products or services. The availability of insights into current business operations along with future predicted trends and combining such information into meaningful insights paves way for a better estimated and allocated budget.
- Also, having insights into projection about possible occurrences in the future enables firms to make improved changes to their business strategies and as well change the operational structure in order to change their outcome.
- It also helps firms to plan and set measurable targets depending on previous and current data. The availability of accurate data and statistics for analysis enables firms to make decisions on what amount of growth, change, or improvement that will be determined as a success.
What Methods are best you feel for Price Prediction/Forecasting.
There are three major methods used for price prediction. The following is an explanation of each method
- Technical analysis: This is a trading tool used to assess investments and point out trading opportunities in the patterns and trends of price on charts. It was brought about by Charles Dow and the Dow Theory in the late 1800s. The analysis functions from the assumption that previous trading activity and price changes of security can be vital indicators of the security’s future price movements when paired with the right trading rules. Therefore, the technical analysis aims to forecast the price movement of virtual any tradable tool that is subject to forces of demand and supply.
- Fundamental Analysis: This is a method used to determine the value of a particular asset by laying emphasis on underlying factors that affect an industry’s future aspects and actual business. The individual needs to analyze the economic well-being of a financial entity as opposed to its price movement along with this analysis. This analysis is employed to identify undervalued assets in the market. It makes the assumption that buyers would be attracted because of the low prices, and they would buy the asset with an amount enough to increase its price. The aims of this analysis are below;
To assess and evaluate the management of the property and make financial decisions internally.
To make calculations on asset’s credit risk
To identify the asset’s intrinsic value
To conduct assessment and valuation on the asset and make a prediction on where its price will go
- Sentimental Analysis: This involves the use of sentiments to make assessments about how the market behaves by a particular trader. In such analysis, the trade may just make a prediction on whether the market is on the rise in a sound economy or the market exists in a receding economy where stocks are declining in value without taking into looking at fundamental or technical analysis. The mode of this analysis is based on media as well as news discussions.
The sentiment analysis helps firms to gauge the expressions and feelings of their customers about the different areas within the business without necessarily reading a lot of customer comments at a go.
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.
Here I will want to demonstrate the price forecast using Bitcoin from its previous trends then also a current trend of the chart taken a couple of minutes ago on giottus.com
I will explain briefly from late 2020 through to 2021.
Let's consider the above chart, we see how Bitcoin has performed through these years, let's not think far, this chart shows how Bitcoin performed from late 2020 through to 2021. We see that in March the ending part of March Bitcoin had fallen drastically, this means that anyone who had shares would have run at a loss. So what this is saying is that any investor who was willing at that time to make a profit with his money was not supposed to buy shares of Bitcoin cause of its fall. But we do see that in the latter part of March through to May, July, and late July, Bitcoin had gone up. It had a massive pull and this means that any investor who was willing to make some profits with his money or double up some profit was supposed to buy Bitcoin at that time. We also see that since that rise Bitcoin has not fallen below that ever since
This is the second and most current chart of the performance of Bitcoin, Bitcoin came back to where it started in October as it did in 2020 also shown in the first chart. At this point, it's not advisable for anyone to buy Bitcoin because it's not stable, it receives a pull and falls which causes a fluctuation making it not good to invest. But look at what happened in December, it had risen which made it good for investment. but also in march this year it fell back and went up again and here we are in April, we see from the chart Bitcoin has gone up and trying to drop, Here, we all are in a dilemma it's not that safe to invest cause it's possible it might go up or drop. But looking at what might happen within the next seven days, it's possible Bitcoin might rise. There have already been so many lapses so I believe fully that Bitcoin will shoot and it will be ready to invest, So I advise that anyone willing to double profit should invest in Bitcoin.
From the discussions above, it is very clear that price forecasting is a very important tool in determining the success of businesses. This is because it helps these businesses to make a good budget as well as the proper allocation of such budget,