The power of the volume of trading: Understanding a key indicator on the markets of cryptocurrencies

In the world of cryptocurrencies, commercial volume is often misunderstood as a simple reflection of the feeling of the market. However, it is much more than that. The volume of trading, in particular its absolute and relative values, is one of the most critical indicators on the markets of cryptocurrencies. In this article, we will immerse ourselves on the importance of the volume of negotiation and why it should be considered a key measure for merchants, investors and market analysts.

What is trading volume?

The volume of trading refers to the total number of parts of parts or tokens exchanged over a specific period, generally 24 hours. It is calculated by multiplying the average daily exchange rate by the total number of trades executed within this period. In other words, it is a snapshot of the number of times an asset has been bought and sold in a given day.

Why is the trading volume important?

• Market size and depth : High trading volumes indicate a larger market size, which can cause more liquidity, wider price movements and increased commercial activity.

• Trendy indicators : a high volume of trading can be an indicator of a trendy market, because it suggests that the asset is gaining popularity and momentum.

• Risk management : The volume of trading helps traders to manage risks by providing a reference for potential losses. If a merchant sells at an inflated price (due to a high volume) but then buys at a lower price, it can minimize potential losses.

• Sensation of the market : A decrease in the volume of trading can indicate a lowering feeling on the market, because buyers can reduce their activity.

Types of trading volume

• Absolute volume : This is the total number of transactions executed during a given period.

• Relative volume ratio (RV) : This measures the percentage of variation in absolute volume over a specific time compared to a basic value (for example, 100). A higher RV ratio indicates an increase in negotiation activity.

Take -out of trading volume

• The volume is not affected by the volatility of the market : when the price of a cryptocurrency is volatile, its trading volume could temporarily increase, but that does not necessarily mean that it will continue to gain ground.

• Volatility is relative : Although high trading volumes can indicate increased activity, low volumes can always be indicative of a strong market feeling or upcoming correction.

• Market Momentum : A significant drop in the volume of negotiation can point out a passage from a purchase trend to a sales trend, indicating a potential low price.

Best practices to use trading volume

• Define a reference value : Establish a reference for your trading system by following the historic trading volumes of the assets that interest you.

• Watch and adjust : Keep an eye on your trading volume measurements over time and make adjustments to your strategies if necessary.

• Combine with other indicators

  

  : Use the volume of trading as one of the many tools to analyze market activity, rather than counting only on it.

Conclusion

In conclusion, trading volume is a powerful tool to understand the markets of cryptocurrencies and make informed decisions on the purchase and sale of assets. By following the absolute and relative negotiation volumes, traders, investors and analysts can obtain valuable information on feeling, trends and risk management strategies. While the cryptocurrency space continues to evolve, it is essential to stay up to date with the latest developments in the analysis of negotiation volumes to navigate the markets effectively.

Additional resources

• Coinmarketcap: a complete database of the prices of cryptocurrencies and trading volumes.

• Cryptocompare: provides real -time market data, including trading volumes for various assets.

• TradingView: offers a range of technical indicators, including trading volume graphics.

UNDERSTANDING ROLE NFTS CRYPTO TRADING