Last updated on February 17th, 2022 at 09:42 am.
Factually, what does cryptocurrency trend and cryptocurrency volume movement tell to crypto traders? Volume is one of the many indicators we may use in trading. And it will not be overlooked by traders. The various perspectives of crowd psychology correspond to volume. Volume can provide more solid evidence of where the market is trending when we have a deeper understanding of it. This trend-volume relationship is one of the fundamentals that every trader should understand. You have to be skeptical when you see an experienced trader who doesn’t know how to use volume.
The volume concept is always relative to the trend, one of the most significant things a trader must remember. When the market trend improves, so must the volume direction. And, when the market trend weakens, so must the volume direction. And if we see this in the market, it’s a natural cycle. Let us look at some more details concerning volume and price fluctuation.
The volume follows the trend, to begin with. It’s common for prices to drop and for the volume to decrease. Similarly, it is common for prices and volume to rise. The quantity of money that flows into and out of an asset should be the same. It is because the level of buyer and seller enthusiasm determines the volume. There is a lot of demand if there are a lot of purchasers. As a result, the asset’s value grows. And, if there is more selling due to FUD (Fear, Uncertainty, and Doubt), the asset’s price will fall. Take heed. When the price of an asset suddenly rises without being supported by volume, be cautious. This event is a red flag and a hint of a likely reversal.
The combination of rising prices and declining volume is bearish. When an asset’s volume falls, it implies technical weakness. If the chart shows greater negative divergence, the price is weakening. It suggests a lack of excitement on the part of the customer. When purchasers’ power gets depleted, selling zeal will triumph. We can call it a bearish sign when the new high price has no related volume. It’s also unusual when the price trend grows while the volume declines. It is a negative indicator. All this information and more of the latest crypto trends & cryptocurrency volume could be easily accessed on BitiQ.
Price dropping and volume increasing is a bearish sign. Low price and high volume are unusual circumstances. There are more vendors than buyers; therefore, this is a good sign. However, this isn’t always the case. Occasionally, only two or three bars of volume increase before abruptly decreasing. But it is noticeable that the direction of price and volume are different. This situation often happens in a downturn market.
On a negative breakout, the rising volume is bearish. When a price pattern, trend line, or moving average breaks after a high volume, this is what happens. A trend that continuously goes up breaks out in this situation if the volume below it also goes up. This situation is a bearish indication.
Churning is a bearish indicator. This case occurs when an asset’s volume continues to climb despite the price remaining unchanged during a sustained uptrend rally. It is a sign that the market is in the midst of a bearish trend.
Accumulation is a positive sign. The asset’s incredibly high volume is one of the dependable signals following the major low volume, but the price does not change much. This situation indicates that it is accumulating, which is a good thing. It is a bullish indication.
Bearish indicators include a little rounding top and a volume rounding bottom. Another unusual circumstance has arisen in this case. A bearish indication forms when the price pattern resembles a little rounded top (price) and rounded bottom (volume). The asset’s price rises as time goes on, while its volume falls. And, as we indicated earlier, when the price drops, the volume rises.
Extraordinary low volume is very positive when corroborated by price and expanding volume. This concept is especially true if the market is declining or even just stagnating, with unusually low long-term volumes. It will only be bullish if the market trend breaks and high volumes get sustained. In this scenario, you can notice an accumulation (characterized by a horizontal trend line) and a low volume on the chart. The price will continue to rise after it breaks its horizontal trend line in tandem with increased volume.
When verified by price and expanding volume, unusual low volume is very bearish. In contrast to the preceding example, when extreme low volume happens in an uptrend or a stagnant market, the trend will break, resulting in a collapse accompanied by huge volumes. It’s a bearish omen. Before the significant downward trend, we’ll see how its volume drops and becomes exceedingly low. The volume rises at the same time.
Let’s talk about parabolic blast off for a moment. The parabolic blow-off, according to Investopedia, occurs when the price of a security rises sharply and quickly. This circumstance happens when the value of an asset skyrockets. People’s panic buying occurs here, and it falls fast. At the same time, the volume is rapidly increasing. It is unusual in the traditional market, but it appears to be usual with bitcoin. It happened to Bitcoin countless times.
Another essential concept to understand is the selling climax. The parabolic blow-off is the polar opposite of this. A selling climax is a large-volume collapse that occurs during a bear market before the trend reverses. The volume is increasing, and the price trend is falling. We can see how the market trend gradually turns following the selling climax. It is usually a positive sign, especially if the next volume is smaller.
To Sum It Up
There is no guarantee that it will function 100 percent, as with other indicators. When you combine it with other price characteristics and patterns, interpretation, trend line violations, and moving average crossovers, the odds of it working in your favor increase. Details like these are truly overwhelming. That is why many beginner traders opt to seek assistance from professional traders on platforms like BitiQ. These are what tell cryptocurrency volume and trend to the crypto traders.