The importance of trading volume in the assessment of market trends
In the world of cryptocurrency, the Trade Volume is a key indicator that investors and traders use to assess market moods and make informed decisions. While price movements are often based on basic factors, such as supply and demand, technical analysis and market messages, trading volume can ensure valuable insight into the basic dynamics of the market.
What is a trading volume?
The volume of rotation refers to the number of shares or units in which cryptocurrency is the subject of trade at a specified time. It is a measure of the number of buyers and sellers participating in the market, which in turn affects the price of assets.
Why is the rotation volume important?
There are several reasons why the trading volume is necessary to assess market trends:
- Market moods : The high volume of trading often indicates strong market moods, because more and more investors are buying or selling assets. And vice versa, low trading volume may suggest poor market trust.
- Price direction
: The direction of trading volume usually reflects the general direction of the market. If buyers and sellers are largely balanced in terms of supply and demand, this may indicate a stable market trend.
- market indicators
: Many technical indicators, such as a relative force indicator (RSI) and average movable (MA), rely on the volume of rotation to calculate their value. Analyzing these indicators with the details of the trading volume, traders can better understand market trends.
- Support and resistance : Trading volume can help identify potential levels of support and resistance, because buyers and sellers tend to accumulate around these areas.
What is the difference between a rotation volume and price?
While the price movements are often powered by basic factors, such as supply and demand, market dynamics affect the volume of trading. Here is a comparison of these two:
- Price : Cryptocurrency price movement depends largely due to supply and demand forces. When more buyers or sellers join the market, prices usually move in response.
- Trading volume : Trading volume, on the other hand, reflects the overall level of activity on the market. This is the measure of the number of buyers and sellers participating in the market.
Examples of large volume transactions
Some noteworthy examples of large volume transactions that have affected market trends include:
- Bitcoin Cash (BCH) : In January 2018, BCH recorded a significant increase in prices, driven by a high trade volume, because investors tried to use the growing value of assets.
- Litecoin (LTC) : In May 2017, LTC was recorded a significant increase in prices, powered by high turnover, which reflected the enthusiasm of investors for potential cases of using cryptocurrency.
Trade tips based on the volume of rotation
If you are new to trade cryptocurrencies or want to improve your trade strategy, here are some tips:
- Monitor trading volume : keep an eye on a volume of trading when making investment decisions.
- Identify trends : Look for trading volume patterns that may indicate a potential market trend.
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Application
The amount of turnover is an important aspect of assessing market trends in cryptocurrencies. Understanding its importance and how it differs from price movements, investors and traders can make more conscious decisions regarding potential purchase or sale. Remember to thoroughly monitor the volume of trading when making investment decisions, because trade with a large volume may indicate a strong change in market moods.
