Volumes are among the most relevant indicators in crypto trading. They measure the strength of a trend. Volumes also make it easier to know the movement of large portfolios (whales) in the crypto market. This is then a very important concept in trading, neglecting it can often lead to bad decisions. Follow us to learn how to use volumes in crypto trading.
How do volumes work in crypto trading?
Reading the volumes indicator is quite simple. It is represented as a histogram displayed (most often) at the bottom of a chart. They can then be interpreted as candles without wicks.
A candle indicates both the volume of transactions exchanged over a given period, and the market trend during this period. Thus, a bearish session will be represented by a red candle and a bullish session by a green candle. The greater the amount of trades traded, the longer the candle will be.
It should be noted that a high volume means that many trades have taken place, which shows the presence of many traders in the market. Conversely, low volume means few trades have taken place, showing the indecisiveness of traders in the forex market. cryptocurrencies.
You can then predict the sentiment of other investors simply by looking at this volume indicator.
How to take advantage of volumes to succeed in crypto trading?
You can profit from volumes simply by combining them with other trading strategies.
As an example, let’s take the case of a breakout of support or resistance:
- When the price breaks an important support/resistance level with low volume, it is most likely a false breakout. Those are the breakout traders who are most often trapped by this false breakout.
- Vice versa, a breakout followed by a large volume means that the market is really determined to break this level.
Why use volumes?
Using volumes can help you read the sentiment of other investors in the market. Now that you know roughly how it works, make volumes part of your arsenal to be more successful in crypto trading.
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