What is price?
It would seem to be a simple question. Many may answer that price is the cost of an asset for which it can be bought at a certain moment. Such simplification does not allow us to understand the main thing in trading: how the price is formed, what factors influence the price movement in a certain direction and how to predict the price movement with a high degree of probability. It is like answering the question «what is a car engine» with «it is a device that helps the car move». According to this logic, if the car does not move, then the engine is broken. But maybe it just ran out of gas? Or the spark plugs are out of order and the engine simply cannot start?
So let’s try to figure out what forms the price of an asset and what to pay attention to. This will help us understand where the price is moving, and which position, short or long, will ultimately bring us profit.
How to predict the price?
The main question is how to accurately predict the price of cryptocurrency? There are several approaches to this, but, unfortunately, none of them can guarantee an accurate forecast. The price can be affected by many factors, such as market sentiment, news events, or even statements by opinion leaders (remember Elon Musk’s Twitter, which many traders follow in all seriousness). In addition, the cryptocurrency market is global. Many participants from all over the world open and close transactions 24 hours a day, which makes cryptocurrencies very volatile and the price can change significantly in a short period of time.
The main disadvantage of any forecasting method is that it works on historical data, which only gives a certain probability that the market will react in the same way as before. Therefore, it is important to understand that many classical approaches that came to cryptocurrency from traditional trading (for example, technical analysis) can give inaccurate or contradictory results.
If we return to basic economic theory, the value of any asset is determined by the balance of supply and demand. This is a fundamental principle that forms the price. Other factors, in turn, can change this balance. For example, the following factors can influence changes in supply and demand:
- news background — this can be both global events and news on a specific cryptocurrency
- changes in legislation and regulation
- market sentiment and overall turnover
Let's get to practice
Pay attention to the general price trend on different timeframes, the trend of changes in open interest and volumes, approaching important levels and economic news. But remember that any forecast is only a probability that can be higher or lower. Even large investment funds with a huge staff of analysts and access to closed information cannot 100% guarantee market movement in a certain direction.
(from $1.5373 to $1.7985)
The chart above (ONDO/USDT, Binance exchange, 15-minute candles) is a classic example of working with a price pump. The position before the sharp price increase: the trend is upward, but the volumes are small.
Then there is a sharp increase in the price by 9% in 15 minutes. If we analyze other parameters (price trend on other timeframes, determine the levels and check the volumes), there are grounds for opening a long position.
The more data you have for analysis, the more accurate the forecast can be. And our project will try to help you by collecting maximum information in one place, so that it is convenient for you and your trading is as profitable and confident as possible.