Hello, traders! Are you fascinated by the world of technical analysis, charts, and indicators? If so, today we have something that can add an exciting layer to your trading strategy: combining predictions from multiple models.
Why Rely on One When You Can Have Many?
When trading cryptocurrencies, you often rely on a single source of information, like Moving Averages, Bollinger Bands, or Fibonacci levels, to make buy or sell decisions. But what if you could harness the power of multiple models to predict price movement? You could think of it as a group of experts coming together to give a well-rounded opinion.
1. Creating a meta-model: This is done by using price predictions from many –good- models as an input to another model. This “meta-model” tries to identify the best way to combine predictions from multiple models to achieve the most accurate predictions. For instance, if one model predicts Bitcoin to go up based on historical price data, another model predicts a rise due to recent increases in transaction volumes, and a third model forecasts an uptrend because of positive market sentiment, combining these can offer a more reliable prediction. This, however, requires training and testing the “meta-model”. Unfortunately, we don’t have this feature currently on Coincharted.
2. Manually Aggregating the prediction results:An easier alternative that could be done by any trader is to “summarise” the predictions of multiple models into just one prediction, which will make it easier for you to benefit from the predictions of multiple good models.Aggregated versus non-aggregated predictions
Here we show an example of bitcoin prediction in October 2023. In the first figure, the predictions are made using a one-day prediction from the model with the highest accuracy (lowest Average Error). For more details about model accuracy metrics, check this article.
While figure 2 shows one-day price prediction calculated from the average prediction of the best 10 models (The 10 models with the lowest error). As you can see, the aggregated prediction is smoother than one model prediction. It also reacted faster to sudden bitcoin price changes and is overall more accurate than the one model prediction
Ready to Step Up Your Game?
Here at Coincharted, You can easily build multiple models and get one-day predictions in addition to expected error range. There are many methods a trader could use to aggregate the predictions. We will discuss a few examples in the next article.
Remember, trading involves risks, and it’s essential to do your due diligence. But if you’re looking for a way to enhance your trading capabilities, combining predictions from multiple models could be the game-changer you’ve been waiting for.
