Along with market capitalization and circulating supply, the volume is one of the most prominent metrics in the cryptocoin market. Trading volume generally can be seen as the bottom of vertical bars on price charts. Volume activity can be shown by comparing the height of those bars to each other. Since these charts are often specific for a single exchange, however, a trader can also visit different exchanges data aggregators, for instance CoinMarketCap to see the overall asset trading volume numbers, as every exchange have a different volume.
As per the recent survey conducted by ZedXe markets revealed that volume was an indicator of choice for 39 percent of respondents while the Relative Strength Index comes in the second number with 29% of the total vote.
What is a high trading volume?
Volume is a measure of how much of a financial given asset has been traded in a given time period, or how many assets have been brought or sold over a particular time. It is a powerful tool of crypto trading which is often overlooked because traders find it a simple indicator. Volume information can be found from anywhere, but only a few traders or investors know how to use such an indicator to increase their profit and reduce the risk.
When we talk about high trading volume, it means a significant money flow and interest in a given asset. When bitcoin trading volume goes up, it indicates that more people are trading asset, or people are investing in trading the asset. It can sometimes be used to measure the interest and attention.
Volume can sometimes use to give the hint toward a change in trend. Generally, divergence is mentioned in the case of the Relative Strength Index (RSI) and sometimes it can also apply on trading volume.
Dramatically Swings the Prices
When the volume is low, it can sometimes leave the market vulnerable to significant price moves. The reason behind this is due to thin order books. If the bitcoin’s daily trading volume is low, it means the order book is thin, lacking enough orders at the current price to satisfy a big seller/buyers. If a huge order comes through and buys or sells the entire asset within the close proximity then it can cause slippage, and price can react dramatically.
Volume becomes extremely crucial when speaking about altcoin trading. If a coin or token is not getting much volume, it can become challenging to scale or unload the substantial position, this is because buyers are very limited.
What are the different volume technical indicators?
- Chaikin Money Flow (CMF)
The Chaiking Money Flow indicator is one of the interesting associated indicators which gauges the volume of money movement regarding specific time segments.
- On Balance Volume (OBV)
This is another imperative volume trading parameter that comes into play regarding the crypto space. This indicator helps to present the stream of the volume concerning price trend or movement.
To Sum Up
It is important to know that no indicator or parameter is up to the mark. False signals, fake-outs, or break-outs do occur. It can be helpful to use numerous time-frames into account, as well as finding congruence with more than one indicator. Traders should develop and learn what works best for their personal trading system. Today, trading in cryptocurrency is easier than ever, now you can buy crypto with debit card, credit card, or via other blockchain-based currency. But before starting the trading process, it is crucial to collect complete information about the specific coin or token.