The importance of the volume of trading in the evaluation of market trends
In the world of cryptocurrency, the negotiation volume is a crucial metric that investors and operators use to evaluate the feeling of the market and make informed decisions. While price movements are often guided by fundamental factors such as demand and demand, technical analysis and market news, the negotiation volume can provide valuable information on the underlying market dynamics.
What is the trading volume?
The negotiation volume refers to the number of actions or units that a cryptocurrency is exchanged in a specific period of time. It is a measure of how many buyers and sellers participate in the market, which in turn affects the price of the activity.
Why is the trading volume important?
There are several reasons why the trading volume is essential for the evaluation of market trends:
- Feeling of market
: the high volume of negotiation often indicates a strong feeling of the market, since a greater number of investors acquire or sell the activity. On the contrary, a low volume of trading can suggest a weak market trust.
2 If buyers and sellers are largely balanced in terms of supply and demand, it may indicate a stable market trend.
- MARKET INDICATORS : Many technical indicators, such as the relative resistance index (RSI) and mobile media (but), are based on the negotiation volume to calculate their values. By analyzing these indicators with data on the trading volume, traders can get a better understanding of market trends.
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How does the trading volume differ from the price?
While price movements are often guided by fundamental factors such as offer and demand, the negotiation volume is mainly influenced by market dynamics. Here is a comparison between the two:
- Price : The price movement of a cryptocurrency is largely determined by the supply and demand forces. Since more buyers or sellers join the market, prices tend to move in response.
2 It is a measure of how many buyers and sellers participate in the market.
Examples of high volume operations
Some remarkable examples of high volume operations that have influenced market trends include:
- Bitcoin Cash (BCH) : In January 2018, BCH saw a significant increase in prices, led by a high negotiation volume, since investors have tried to capitalize on the growing value of the activity.
- Litecoin (LTC) : in May 2017, LTC recorded a substantial increase in prices, fueled by a high volume of trading, which reflected the enthusiasm of investors for the potential cases of use of cryptocurrency.
Tips for trading based on the volume of trading
If you are new in cryptocurrency trading or want to perfect your trading strategy, here are some suggestions:
- Monitor the volume of trading : keep an eye on the volume of negotiation when you make investment decisions.
- Identify the trends : search for models in the trading volume that can indicate a potential trend of the market.
- Use trading volume indicators : many technical indicators, such as the stochastic oscillator and Bollinger bands, incorporate the trading volume data to improve their precision.
Conclusion
The volume of trading is an essential aspect of the evaluation of market trends in cryptocurrency. By understanding its meaning and the way in which it differs from the price movements, investors and traders can make more informed decisions on potential purchase or selling opportunities. Remember to carefully monitor the trading volume when you make investment decisions, since a high volume trade can be indicative of a strong change of market feeling.
