HodlX Guest Post Submit Your Post
If you are a pro trader, you’ve definitely heard about trading signals and probably used them.
In the volatile, ever-changing environment of the free market, they provide insights into potential market trends, entry and exit points and other relevant information to guide traders’ decision-making process.
To put it short, they offer peace of mind and help to build more profitable trading strategies.
Sounds too good to be true? Maybe.
In this article, we will explore if signal-based trading is viable, what makes crypto different from traditional asset classes and how Web 3.0 investment will benefit from AI integration.
Trading signals 101
Trading signals is a broad category, with technical analysis for instance, past market data, price momentum or changes in trading volumes at its core. Still, traders often also factor in fundamental analysis.
Fundamental analysis is one of the emerging methods in trading that aims to determine the intrinsic value of the underlying coin and separate it from purely speculative price movements.
In academic research and practical strategic use alike, there is a growing consensus in focusing on hash rate or amount staked, average transaction value, daily transaction count, market cap and liquidity.
An abrupt change in any of these metrics whether technical or fundamental can signal that a currency is over- or undervalued, a trend is likely to build up or reverse and many other things.
At the same time, clear directives provided by trading signals help to navigate the complex market landscape.
Although trading signals, like any other model, are not perfect, they also help to mitigate the human factor in trading.
According to Nobel laureate Robert Shiller, markets are inherently inefficient, but traders can strive to be as rational as possible in their approach and if they can’t, they fail.
In the scenario where risk aversion, FOMO or just a bad day could drastically influence our decisions, trading signals provide a backup.
Leveraging AI for effective trading
Two Yale researchers found that most of the cryptocurrencies’ price variation can be explained only by two factors momentum and investor attention.
Therefore, accurately predicting which coins could have the most volatility and most investor traction can help to move consistently before the market.
The best way to track these variables could be emerging AI-based technologies.
Reducing…
Click Here to Read the Full Original Article at The Daily Hodl…
