How to use volume as a trading indicator?
We will examine how trading volume can act as a strong signal to guide your cryptocurrency trading choices. Understanding the role can enhance the likelihood of successful trading.
Confirmation of trend direction
Having a grasp on the intricacies of trading volume can be highly beneficial in verifying the trajectory of a market trend. Here's the method:
An increase in trading volume can confirm the beginning of either a breakout or a breakdown in both the cryptocurrency and traditional markets. A greater amount of participation in the market indicates a higher likelihood of the trend persisting. If Bitcoin's price surpasses a resistance level with significant volume, it is a positive sign.
Reversals: A decrease in trading volume could indicate an upcoming reversal in trends. If you see Ethereum's price rising but with less trading activity, it could mean the upward trend is weakening.