The importance of the volume of exchanges in the evaluation of market trends: a key to the investment factor of cryptocurrency
In recent years, the world of cryptocurrency trading has experienced explosive growth because prices fluctuate considerably in response to moods and market news. However, there was often an essential factor between chaos: the volume of trade. In this article, we will immerse ourselves on the importance of the commercial volume of market trends and why it should be the main aspect of all serious cryptocurrency traders.
What is the volume of trade?
The volume of trade refers to the total amount of the cryptocurrency or to other financial instruments which are negotiated over a period of time. It is a way to buy, sell or actively change these assets. The volume of trade can provide valuable information on the dynamics and the feeling of the market and help traders make more reasonable decisions.
Why is the volume of trade important?
The volume of trade has several key characteristics which lead to an essential factor in the evaluation of market trends:
- On the one hand, this indicates that many people want to buy or sell, which can lead to a higher price change. On the other hand, this can also cause excessive noise on the market, which makes it difficult to search for significant trends.
- Approval of the trend : The volume of exchanges can help confirm whether the trend is legal or not. If prices are constantly negotiated above or below a certain level, this can mean that the trend is durable and is worth more attention. Conversely, if prices are extremely fluctuated between several levels, this can be a sign of a more sophisticated market dynamic.
- Price sensitivity : The volume of exchanges can also affect the sensitivity of the price. The property with a large volume of trade is generally more volatile, which means that they quickly react to the changes of supply and demand.
- Liquidity of the market : The volume of exchanges is closely linked to the liquidity of the market. Higher volumes often indicate better liquidity, which allows merchants to buy and sell goods at current prices.
How to use the volume of exchanges to assess market trends
To effectively use the volume of exchanges to assess market trends, consider the following strategies:
- Finding volatility peaks
: a large volume of trade in volatile periods may indicate that some assets gain or lose ground.
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- Analyze price vibrations : Observe how the commercial volume interacts with price vibrations such as Bollinger bands or other technical indicators.
- Compare volumes on different markets : Comparison of different markets or assets on a market (for example, Bitcoin and Ethereum), consider the compromise between high and low trading volumes.
The best practice of trading volume
To maximize trade efficiency in the assessment of market trends, follow this better practice:
- Use several indicators : Connect the volume of trading with other basic and technical indicators to acquire a more detailed understanding of market dynamics.
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- Avoid noise : Be sure not to interfere with extreme market fluctuations which can be caused by excessive trade.
Conclusion
Trade volume is a critical factor in the assessment of market trends and reasonable investment decisions on the cryptocurrency markets. By understanding the importance of the volume of exchanges and using it with other indicators, traders can gain a more precise image of market dynamics.
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