Forecasting

Support/Resistances

Traders often use support and resistance lines to influence when to enter or exit a trade. Most will bundle these with other signals. Traders have reported that using support/resistance as an alert then forecasting off these lines has lead to improved trading outcomes. For instance, If SOL is around or hits a support line, then a forecast showing a clean reversal indicates to these traders they should look for an entrance. Conversely, if the forecast shows muddy movement about the support then the trader may wait to see what develops.

Fibonacci

This section will be short. The support/resistance line technique has also been reported for Fibonacci extensions and retraces. Again, this is one signal among many. These traders are incorporating the forecasting into an already effective trading strategy.

DLMM

There are multiple strategies that can be used for DLMMs and forecasting. We will focus on two-sided pools and one-sided pools. The two-sided pools will be used to derive yield. The one-sided pools will be used to exit or enter a position. If you are unfamiliar with DLMMs, you can read about them here.

Two-sided DLMM

When a forecast shows limited movement to the upside or downside, that does not mean an opportunity does not exist. Many traders have begun using DLMM pools with forecasting to improve their yield. It's been reported that users will take assets they want to hold then use forecasting to determine the most likely range for the asset. If it is a relatively stable range then they will setup a DLMM position using the price range to determine the bin size and span.

For instance, if the range is tight then they will use smaller bin steps like 20. If it is a larger range (more volatility forecast) then they might use a bin step size of 200. The goal of this is to capture the full range of price movements without exiting the full span of the DLMM. The DLMM will only earn fees when the trading is happening within its bounds. Forecasting allows these LP earners to maximize yield and time within range.

One-Sided DLMM

Two-sided DLMM can be used when trends are sideways. However, if someone wants to enter or exit a position without impacting charts then a one-sided DLMM can be the most beneficial apparatus. The user doesn't need these entries or exits to be permanaent. Scalping a quick dip is also available using this strategy.

The key difference is the users only enter with one token instead of a pair. For this to work, the other tokens price will need to increase (buy into the pool) or decrease (sell into the pool). In this situation, the traders are looking for a trend change. The magnitude of the trend will determine the bin step size. Traders have successfully used forecasting to trade out of tokens using a bounce off resistance levels (like above) and using a DLMM to capture yield and exit into a different token. The forecast act as a signal for timing and bin step sizing.