The power of trading volume: Understanding a key indicator on cryptocurrency markets
In the world of cryptocurrencies, the volume of negotiation is often misunderstood as simply a reflection of the market feeling. However, it is much more than that. The trading volume, especially its absolute and relative values, is one of the most critical indicators on cryptocurrency markets. In this article, we will deepen the meaning of the volume of negotiations and because it should be considered a key value for traders, investors and market analysts.
What is the trading volume?
The volume of negotiation refers to the total number of coins or chips changed for a certain period, usually 24 hours. It is calculated by multiplying the average daily exchange rate with the total number of operations performed at that time. In other words, it is an image how many times a resource has been purchased and sold in a certain day.
Why is trading volume important?
- Market size and depth : Large trading volumes indicate a larger market dimension, which can lead to larger liquidity, larger price movements and increase commercial activity.
- fashionable indicators
: A strong trading volume can be an indicator of a fashionable market, because it suggests that the activity gains popularity and impulse.
- Risk management : The trading volume helps operators to manage the risk, providing a reference point for potential losses. If a trader sells at a swollen price (due to a large volume), but then it covers at a lower price, it can minimize potential losses.
- Mercato feeling : A decrease in the negotiation volume can indicate a feeling of the Bearish market, because the buyers could reduce the activity.
Types of trading volume
- Absolute volume : This refers to the total number of transactions performed in a certain period.
- The ratio of the relative volume (RV) : This measure of percentage variation of the absolute volume compared to a specific period of time compared to a basal value (for example 100). A larger RV report indicates an increase in commercial activity.
TRAINING CHEPT from the volume of negotiation
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- Volatility is relative : While large trading volumes may indicate larger activity, small volumes can still be indicative for a strong market sensation or imminent correction.
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best practices for using trading volume
- Establishes a basic value : Establish a reference point for your trading system by monitoring the historical trading volumes that interest you.
- Monitor and regular : Follow the values of trading volume over time and make changes to strategies, as required.
- Combine with other indicators
: Use the trading volume as one of the many tools to analyze the market activity, rather than to rely exclusively on it.
Conclusion
In conclusion, the trading volume is a powerful tool to understand the cryptocurrency markets and to make the knowledge of the acquisition and sale of activities. By monitoring the volumes of absolute and relative trading, traders, investors and analysts can obtain valuable information on the feeling of market management strategies, trends and risks. As the cryptocurrency space continues to evolve, it is essential to remain updated with the latest developments in analyzing the volume of negotiations to navigate the markets effectively.
additional resources
- Coinmarketcap: a complete database of cryptocurrency prices and trading volumes.
- Cryptocompare: provides real -time market data, including trading volumes for various activities.
- Tradingview: Provides a number of technical indicators, including trading volume graphs.
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