Market Correction – the term is actively used in the stock and foreign exchange markets and is applicable to the cryptocurrency market. In fact, we are talking about the process of fluctuation and normalization of the market price of an asset – traditional or cryptocurrency. The phenomenon of the market correction is extremely important for traders and crypto investors who earn on fluctuations in the market value of an asset. Correction to investors gives an understanding of the prospects of their investment package, helps to determine the strategy for further action. The correction determines whether to further purchase the asset, stop or drain the asset.

Market Correction – the term is actively used in the stock and foreign exchange markets and is applicable to the cryptocurrency market. In fact, we are talking about the process of fluctuation and normalization of the market price of an asset – traditional or cryptocurrency. The phenomenon of the market correction is extremely important for traders and crypto investors who earn on fluctuations in the market value of an asset. Correction to investors gives an understanding of the prospects of their investment package, helps to determine the strategy for further action. The correction determines whether to further purchase the asset, stop or drain the asset.

Each asset in the market has a trend – the direction of movement of the asset’s market rate (rise or fall). Correction of the wound – the movement of the value of the asset in the direction opposite to the main trend.

The trend of growth in the value of an asset is ascending; the trend of falling growth in the value of an asset is downward. The main thing in cases of correction is to distinguish between the concept of downward correction and recession. An incorrect assessment of the movement and the situation in the market, a downward correction adopted for a recession, leads to a panic in the market and a loss of assets, which is expected to lead to an asset collapse.

The main indicator of the market correction is the previous active growth. The process occurs after the market reaches the level values. This necessary mechanism allows you to “cool” the overheated market and prevent it from “burning out”. In the case of currency currencies, the market of which is extremely volatile, you can also highlight that the correction is influenced by such factors as the duration of a certain trend. For example, a downward correction is similar to a recession – it is also sharp, however, after a sharp convergence of the course, there are a consolidation and minimal fluctuations in the asset price rate, which indicates the completion of the correction and the strengthening of the new asset situation.

A market correction is a process that does not depend on the informational cause and external factors, the correction situation is brewing within the market and is realized now of the greatest “heating” of the market. Factors such as external information channels, resonant statements or the movement of assets affect the development of the trend, but not the correction.

Correction depends on such factors:

– Overheating of the market – the moment when the quantity of supply and demand is unbalanced. For example, with a sharp increase in cryptocurrency, there will be a mass of people who want to buy it, buyers’ actions will lead to an increase in the uptrend, and as a result, the “skyrocket” course will take place, and new investors will simply not be ready to buy such assets. However, the sellers in the market will be in excess. The result is an increase in supply amid falling demand in an uptrend. Accordingly, a correction will occur – the market will go in the opposite direction.

– Panic attack on the event of a sharp mass withdrawal of Fiat from cryptocurrency assets – the sales volume increases at the same level of demand, in order to save the market, a corrective depreciation occurs. Such a phenomenon has a certain frequency. The decline in the cryptocurrency rate in February is naturally associated with the approach of the New Year in China. It is also important to take into account drastic changes in legislation – bans on cryptocurrencies in different countries; the transition from anonymity to openness also leads to an increase in transactions to withdraw Fiat from cryptocurrencies.

Term market correction depends on:

– The strength of the previous trend. With a strong and rapid growth of cryptocurrency, especially with unreasonable growth, the correction will be stronger than with a weak gradual growth and will last longer until the market is fully aligned to liquid values.

– Often the correction of equal periods under equivalent conditions is similar in terms. The closer chronologically the correction processes are between themselves, the higher the probability of the relevance of the timing of the correction.

Factors that influence the correction of the cryptocurrency market, differences from the traditional market:

– Cryptocurrency is characterized by strong volatility because the correction in the cryptocurrency market occurs more often and has a longer period.

– The cryptocurrency market is relatively young, many inexperienced players act illogically and unpredictably, therefore, although any asset market operates according to general economic rules, one should not ignore the level of professionalism and validity of the actions of many traders, panic among which can easily ruin altcoin. As a result, people expect more from the cryptocurrency market do not trust anyone, unreasonably risk and are cautious. If the traditional market is a calm and well-established market, then the cryptocurrency market is wavy, swinging, and unprotected.

When a correction occurs on the cryptocurrency market, the main thing is not to panic, but to determine if this is a correction or a decline. Panic and drastic asset loss only lead to aggravation of the trend reversal and delay in the period of correction. Having determined the correction, an experienced investor or trader will determine the strategy of behavior in the market. The strategy depends on the asset, the size of the correction and trends, forecasts and goals of the investor. If the investor plans only to enter the market, then the correction in the value of the asset after growth is the optimal entry point to the market. 

For a trader, it is important to check stop orders, check the balance (especially for margin trading), choose an additional pair and be ready for the market reversal.

It is important to remember that the correction of the cryptocurrency market can be predicted as a phenomenon, but unpredictable as a process. Therefore, when developing AI for trading on a crypto market, it is important to take into account the maximum number of scenarios and signals for profitable trading, even with abrupt trend reversals.

Artem Kazanowski, CEO Evericebot.com

Daria Pomazanova, CMO Evericelabs.com