Power of Trade Volume: Understanding the main indicator in cryptocurrency markets

In the world of cryptocurrencies, the volume of trade is often misunderstood as simply a reflection of the market mood. However, this is much more. The volume of trading, especially its absolute and relative value, is one of the most Christian cryptocurrency markets. In this article, we will take into account the importance of trade volume and why it should be considered the main metric of merchants, investors and market analysts.

What is the volume of trade?

The volume of trade refers to the total number of coins or tokens that are traded over time, usually 24 hours. It is calculated by multiplying the average daily currency course by the number of transactions in that period. In other words, it is an image of how many times the property has been purchased and sold on a certain day.

Why is the volume of trade important?

• Market size and depth : Large trade volumes show higher market size, which can lead to higher liquidity, higher price change and increased trading activities.

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• Risk Management : Trade volume helps traders manage the risk by providing a benchmark due to potential losses. If the merchant sells at an increased price (due to high volume) but then buys at a lower price, they can reduce potential losses.

• Market mood : Decreased trading volume can mean the moods of the bear market as buyers can reduce their activities.

Types of trade volume

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• Relative Volume (RV) ratio : This measures the percentage of absolute volume over a period of time compared to the original value (eg 100). A higher RV ratio indicates increased trading activity.

Basic Considerations from Trade Volume

• Volume does not affect the volatility of the market

  

  : When the cost of cryptocurrency is volatile, its volume may be temporarily increased, but it does not necessarily mean that it will continue to be attracted.

• The volatility is relative : Although high trade volumes can mean increased activity, low -volume may still mean a strong market mood or an impending amendment.

• market acceleration : Significant reduction in trade volume can mean a transition from the purchase tendency to the sales tendency to indicate the potential weakness of the price.

the best practice of trading volume

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• Combine with other indicators : Use the volume of trading as one of the many tools to analyze the market activities, not rely on it.

Conclusion

In conclusion, the volume of trade is a powerful means of understanding cryptocurrency markets and making reasonable decisions on the purchase and sale of property. By observing absolutely and the relative volume of trade, traders, investors and analysts can gain valuable insights on market moods, trends and risk management strategies. As the cryptocurrency space continues to develop, it is very important to constantly update changes in trading volume analysis to efficiently browse the markets.

Additional sources

• Coinmarketcap: A detailed database of cryptocurrency prices and trading volume.

• CryptomPare: Provides real -time market data, including the volume of various assets.

• Tradingview: offers many technical indicators, including trade volume charts.

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