Trading Volume: A Key Indicator Of Market Activity
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The power of the negotiation volume: Understand a key indicator in cryptocurrency markets
In the world of cryptocurrencies, commercial volume is often misunderstood as a reflection of the feeling of the market. However, it is much more than that. The volume of trade, particularly its absolute and relative values, is one of the most critical indicators in cryptocurrency markets. In this article, we will deepen the importance of negotiation volume and why it should be considered a key metric for merchants, investors and market analysts.
What is commercial volume?
The negotiation volume refers to the total number of coins or tokens negotiated during a specific period, generally 24 hours. It is calculated by multiplying the average daily exchange rate by the total number of operations executed within that period. In other words, it is a snapshot of how many times it was bought and sold an asset within a given day.
Why is negotiation volume important?
- Market size and depth : High negotiation volumes indicate a larger market size, which can lead to more liquidity, broader price movements and greater commercial activity.
- Trend indicators : A strong commercial volume can be an indicator of a trend market, since it suggests that the asset is gaining popularity and impulse.
- Risk management : The negotiation volume helps merchants to administer the risk when providing a reference point for potential losses. If a merchant sells at an inflated price (due to the high volume) but then buys at a lower price, it can minimize potential losses.
- Mercado feeling : A decrease in negotiation volume may indicate a feeling of the bearish market, since buyers can be decreasing their activity.
Types of commercial volume
- Absolute volume : This refers to the total number of transactions executed during a given period.
- Relationship of relative volume (RV)
: This measures the percentage change in the absolute volume in a specific time frame compared to basal value (for example, 100). A higher RV ratio indicates greater commercial activity.
Trade volume key control
- The volume is not affected by market volatility : When the price of a cryptocurrency is volatile, its negotiation volume could temporarily increase, but this does not necessarily mean that it will continue to gain traction.
- Volatility is relative : while high negotiation volumes may indicate greater activity, low volumes can still be indicative of a strong feeling of the market or a nearby correction.
- Market moment : A significant fall in the negotiation volume may indicate a change in a tendency to buy a sales trend, indicating a possible weakness of prices.
Best practices to use commercial volume
- Set a reference value : Establish a reference point for your negotiation system by monitoring the historical negotiation volumes of the asset that interests you.
- Monitor and adjust : be attentive to your commercial volume metrics over time and make adjustments to your strategies as necessary.
- Combine with other indicators
: Use the negotiation volume as one of the many tools to analyze market activity, instead of depending solely on it.
Conclusion
In conclusion, commercial volume is a powerful tool to understand cryptocurrency markets and make informed decisions about the purchase and sale of assets. When tracking absolute and relative negotiation volumes, merchants, investors and analysts can obtain valuable information about the feelings, trends and market risk management strategies. As the cryptocurrency space continues to evolve, it is essential to stay updated with the latest developments in commercial volume analysis to navigate markets effectively.
Additional resources
- Coinmarketcap: an integral criptomyon price and commercial volumes database.
- Cryptocompa: Provides real -time market data, including negotiation volumes for several assets.
- TrainingView: It offers a range of technical indicators, including commercial volume tables.