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Crypto Blog - News, updates and industry insights How to use the volume indicator when trading cryptocurrency By Liquid In Trading StrategiesLiquid Product November 26, Volume is one of the most powerful indicatorsbut it's often overlooked due to its sheer simplicity.
We are going to take an in-depth look at how to incorporate the volume indicator into your trading strategywhether you are spot or margin trading.
Why Traders Say Volume Is Crypto Price Indicator of Choice
What is volume when trading crypto? Volume is the amount of assets traded during a specific time frame, and is typically represented on a chart by red and green vertical bars.
On a 4-hour BTC chart like the one above, each volume bar represents the amount of BTC that exchanged hands during those four hours. A common misconception when it comes to trading volume stems from the color of the bar. Many people seem to think that a red bar indicates sell volume, while a green bar shows buy volume.
Volume Indicator Trading Part 1
In other words, volume is just the amount of traded assets. Keep this in mind when you are analyzing volume. The volume profile of a trending asset Understanding how to read the volume profile of a trending asset can help you identify possible reversal points. The red squares highlight volume candles that support the downward trend. As you can see, trading volumes are much higher during periods of downward movement.
In the first green box from the left, you can see trading volumes drop as the price of Bitcoin flattens for about two hours. This period of low volume suggests bulls are hesitant to inject buy volume into Bitcoin.
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- Bitcoin Price | BTC Price Index and Live Chart — CoinDesk 20
- Chaikin Money Flow Ease of Movement A volume price trend indicator is useful for determining the exact balance between the supply and demand of security.
- UTC Updated Dec 26, at p.
As expected, the bears come back with more volume to the downside. The second green box shows another period where bears become temporarily exhausted.
Bitcoin trading volume index suggests bulls are still hesitant to enter. Once again, the bears come back with more downside action in the form of multiple high volume bars in succession.
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The third green box shows another period of hesitance from the bulls. Something changes this time around, however. Instead of bears walking the price down further, the bulls take this opportunity to inject volume to push the price upward, as shown by the fourth green box.
Unfortunately, this volume is nowhere near strong enough to break the previous bear dominance, and results in an emphatic rejection. Conclusion In conclusion, always look for confluent signals from the volume indicator to support the current trend in price movement. If price is moving downwards, look for increasing volume to support that movement along with decreased volume during the buyback phases.
Similarly, if price is trending upwards, look for confirmation of decreased volume during pullbacks. Liquid does not endorse or adopt any such opinions, and we cannot guarantee any claims made in content written by guest authors. This content bitcoin trading volume index not financial advice and it is not a recommendation to buy or sell any cryptocurrency or engage in any trading or other activities.
The Surprising Truth About Crypto Volume Indicators
You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with cryptocurrency involves significant risks. We strongly advise our readers bitcoin trading volume index conduct their own independent research before engaging in any such activities. Share this article Keep up to date with Liquid Blog Related articles.
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