First of all i would like today thanks to all professors for sharing such treasure of information with us. I am new on steem crypto academy but i have learnt a lot from here. I am here again to present my next home work which is about Price Forecasting by professor @stream4u.
What Is Price Forecasting
Price forecasting is the process of estimating the price of an item, good, or service based on a variety of features such as its characteristics, production, seasonal patterns, the prices of other goods, deals from several suppliers, and so on. In price forecasting, multiple factors such as trend for specific duration, demand etc are considered by traders to predict the future of any crypto asset.
Consumer-facing travel applications can improve the satisfaction and engagement of their customer by having price forecasts as a function. Many Other companies, on the other hand, can use of knowledge about future prices. Entrepreneurs are required to determine the best time to purchase a commodity in order to change the prices of goods or services that rely on it, or assess the investment appeal of fixed assets.
Model In Price Forecasting
Univariate and Multivariate models are the two types of models which are defined by price forecasting experts.
Univariate Modeling/simulation uses averages, seasonality, and cycles to predict the history of the variable being forecasted. It's a tool for making short-term predictions.
Multivariate Modeling: The experience of variables and generators such as GDP, PPI, inflation, raw materials, and so on is used in multivariate modeling. It is employed where a longer time horizon is needed. According to best practices, four years of historical data are needed for each year of forecasting.
In general, descriptive and predictive analytics are used to estimate prices.
Descriptive Analytics: Descriptive analytics is the method of parsing historical data in order to help explain how a market has changed. Decision-makers gain a holistic view of results and patterns on which to base company strategy using a variety of historical evidence and benchmarking.
Descriptive analytics allows you to transform the raw data into information that you can interpret and communicate. Data collection, study, interpretation, and reporting of results are some Statistical approaches which are used in descriptive analytics.
Predictive Analytics: Predictive analytics focuses on making decisions about unforeseeable future events. Predictive analytics analyzes real data and makes forecasts about the future using a variety of approaches including data processing, statistics, simulation, computer learning, and artificial intelligence.
In the field of market forecasts, predictive analytics entails analyzing real and historical data to estimate the likelihood of future events, results, or prices. Many statistical techniques, such as data mining (finding patterns in data) and machine learning, are needed for predictive analytics.
There are three types of price Forecasting:
|Short.||Days/week, useful for business participants|
|Medium.||Weeks/Months, Profitable supplier and customer negotiation|
|Long||Months/Years, Transmission extension and improvement decisions are affected.|
How to do Price Forecasting
Chart patterns and price movement:
The price movement in crypto market can be predict by considering various factors such as charts pattern, price movement and trend indicators. The exchanger and traders are enable to predict the future of crypto assets by looking at combination of all charts and price movement of that specific crypto currency in crypto market.
Understanding the crypto currencies:
One need to do some on research the crypto currency for which he wishes forcast. Before digging into its forecasting, you need to get the deeper understanding of how the asset operates, what are its characteristics, what is the current price of this asset, how it can be traded, and how we can definite it.
Selecting an appropriate forecating method:
You need to be very careful while selecting the price forecasting method for the crypto currency which you have chosen. To choose the best forecasting method, the traders need to consider the previous/historical data in order to forecast the specific crypto currency.
Discuss on why Price Forecasting is needed?
Both businesses and consumers can benefit from price prediction. It can help with day-to-day activities and/or long-term strategic decisions. Price forecasting apps often encourage consumers to interact with a brand or compare deals in order to invest their money wisely. Price forecasting helps to:
Get Good Profit: Price forecasting helps the traders to make more money. It helps crypto traders make more money by allowing them to know when to trade/exchange at a high profit and when to purchase at a cheaper price when resistance is met.
Decision making: Businesses benefit from forecasting because it allows them to make better business decisions and implement data-driven strategies. Financial and operational decisions are dependent on existing business trends as well as forecasts for the future. Past data is compiled and processed to uncover patterns, which are then used to forecast future trends and shifts. Forecasting enables the enterprise to take proactive measures.
Minimum risk level: The price forecasting minimize the risk level. When you predict the future of some assets and invest money if prediction goes positive , it save you money from big loss and provide you profit to some extent. Sometime the profit level goes down from your predictive level but you never have a lose of money as you have predicted the future of that crypto assets.
Helps Budget: Getting insight of future developments and developments assists companies in determining where to spend their budget and time on specific items such as merchandise, services, or internal areas such as recruiting and strategy adjustments.
Set Goals and Plans: Crypto traders may use price forecasting to set more realistic targets and plans. It helps exchangers in obtaining reliable data, which in turn help them in establishing realistic and attainable targets depending on the data obtained, and includes both actual and historical data. Price analysis enable exchangers/traders for one more time to make decisions about the growth and production of the crypto commodity under consideration.
Predict future of crypto currencies: Price forecasting help to predict changes in the cryptocurrency market: Crypto traders who use price forecasting become more proactive. Price forecasting put them in a proactive rather than reactive role by enabling them to have a glimpse of future and give them an idea about what will happen in future years.
What Methods are best you feel for Price Prediction/Forecasting
Basically three methods are used for price forcasting:
1- Fundamental Analysis
2- Technical Analysis
3- Sentimental Analysis
1- Fundamental Analysis
Techniques such as measuring the weight of financial indices, analyzing and choosing individual stocks, selecting financial news elements, assessing stock trading signals based on financial news, and predicting stock price trend are the part of the fundamental analysis-based approach to stock market forecasting. Fundamental analysis (FA) is a means of determining the inherent value of a security by looking at associated economic and financial considerations.
Fundamental analysts look at everything that can influence the importance of a security, from macroeconomic factors like the state of the economy and market trends to microeconomic factors like the company's management effectiveness. Technical analysis, which predicts the future of markets by analyzing past market data such as price and volume, is considered to be in opposition to this form of stock analysis.
1- Fundamental investors look at securities that are actually traded at a premium or a discount of their true worth.
2- The stock is considered undervalued and a buy recommendation is issued When the fair market value exceeds the market price.
3- determine stock real or fair market value.
4- Technical investors, on the other hand, neglect the basics in favour of analyzing the stock's past market patterns.
2- Technical Analysis
Technical analysis is a trading discipline that analyzes statistical patterns obtained from trading behavior, such as price change and volume, to determine investments and locate trading opportunities. Technical research, as opposed to fundamental analysis, relies on the study of price and amount. Fundamental analysis seeks to measure a security's worth based on market metrics such as profits and earnings. The charts are used for prediction of future price of an crypto currency.
This technique is used to examine how fluctuations in interest, amount, and implied volatility are affected by supply and demand for a protection. It is oftenly used to produce short-term trading indications from different charting instruments, but it may also be used to enhance the assessment of a security's strength or vulnerability in relation to the wider market or one of its sectors. Any security with past trading details will benefit from technical research.
1- Believe that a security's previous trading activities and pricing fluctuations may be useful indicators of potential price developments.
2- Fundamental research, concentrates on a company's financials rather than historical market patterns or stock movements.
3- Price trends and patterns on charts are used to analyze portfolios and recognise trading opportunities.
How Technical Analysis is used
The traders use this method for Price forecasting by analyzing the historical information of any crypto asset. Stocks, shares, options, and currency pairs are all examples of tradable instruments that are subject to supply and demand powers. Technical analysis is used to predict the price movement of such tradable instruments. In reality, some people consider technical analysis to be nothing more than the study of supply and demand forces as expressed in a security's market price movements.
Hundreds of trends and signals have been developed by analysts to facilitate technological analysis trading around the industry. Technical analysts have created a variety of trading systems to aid them in forecasting and trading price fluctuations.
The following broad types of indicators are used by technical analysts for price forcasting in technical analyses:
- Price trends
- Chart patterns
- Support and resistance level
- moving average
- price trend
- Volume and momentum indicators
The method of deciding whether a piece of writing is positive, negative, or neutral is known as sentiment analysis. Natural language processing (NLP) and machine learning techniques are used in a sentiment analysis framework for text analysis to assign weighted sentiment scores to persons, subjects, patterns, and groups within a sentence or word. The nature of crypto market is predicted by seeing weather it's positive or negative.
It is based on observations made by various people in the crypto community. Traders in possession of an asset will sometimes publicly state that the asset will do well; after all, if you own an asset, you will undoubtedly expect it to grow, and people like this are optimistic about their outlook.
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.
In this section, i will explain how to do the price forecasting and what is the best time to invest your money in crypto market with the help of chart graph. But before that we need to clear the concept of support and resistance level.
Support and Resistance
A price level at which a downtrend is likely to stop due to a concentration of demand or purchasing pressure is known as support. The support line is formed as the price of assets or stocks falls and demand for the shares rises. Meanwhile, as rates have risen, resistance zones form as a result of sale interest.
If a support or resistance area has been determined, such price thresholds should be used as possible entry or exit points and when a price approaches a point of support or resistance, it can either bounce back away from it or breach it and move in the same direction until it touch the next level of support or resistance. As price exceeds support and resistance values, buyers will find purchasing help and sellers will find sale resistance.
The above chart shows the support level. When the support level goes up, its mean that it is the best time to invest your money in the crypto market. In this chart, you can see that the market is up trending and the crypto assets which you have selected is at its best.
The above chart shows that the market is at its worst time as the resistance level is high. If you invest your money at this point in that specific asset which you have choosed than definitively you will have loss. At resistance level, you can see in graph that the the line goes down. the resistance is showed in graph with help of red line.
Now we will see the support and resistance level in same chart for more clarification. Here when the green line goes up, it mean market is uptred and when red line goes down it mean market is down.
The below graph showing the trading view of a bitcoin from September 2020 to till now. The support and resistance of currency are highligted there. the red lines show the resistance level and the green line show the support level. when the support level is high or the green line is going up it mean that the market rate is high and you should invest your money at this time but when you see that the red line are going down or resistance level is getting high so no need to invest at this time. If you will invest you will loss as the prediction is getting negative and losing rate is high.
Both businesses and consumers can benefit from price prediction. It can help with day-to-day activities and/or long-term strategic decisions. Price forecasting apps often encourage consumers to interact with a brand or compare deals in order to invest their money wisely.
Price forecasting necessitates the acquisition of domain expertise by a data analyst or scientist: They must comprehend the variables that influence demand for good or services. . Seasonality, holidays, the strength of everyday and weekly events, the political and economic condition in a country or area of concern, environmental and temperature changes, infrastructure repair costs, and a variety of other considerations are only a few of them.
It's also crucial to understand what marketing, sales control, and bidding strategies industry participants employ. It's hard to predict what is good time for marketing but the price marketing help alot to solve this problem to great extend. Without this, the person is blank in market and may lose his money as it may be the crucial time for market when he invest his money and the resistance may high at that time so without price forecasting, the person may lose his money.
So price forecasting is helpful to save money from lose.