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Explosive trading, however, in the middle of chaos, a crucial factor has often been overlooked: trading volume. In this article,
What is trading volume?
The trading volume refers to the total cryptocurrency value or other financial instruments traded in a certain period of time. It is a measure of how the activities that people buy, sell or exchange these assets. The trading volume may provide
Why is trading volume important?
The trading volume has several characters that make it an essential factor in evaluating market trends:
- On the one hand, it is shit that many people are eager to buy or sell, which could lead to more extreme price movements. On the other hand, it can also create market noise, make the discernment of significant trends difficult.
- Trend confirmation : Trading volume can help confirm whether a trend is legitimate or not. The trend is supported that the trend is sustained. In contrast, if prices oscillate wildly between several levels, it could be a sign of a more complex market dynamics.
- Price sensitivity : The trading volume can also influence price sensitivity. Assets with high trading volumes tend to be more volatile, which means they respond quickly to supply and demand changes.
- Market liquidity
: The trading volume is closely linked to the market liquidity. Higher volumes often indicate better liquidity, which makes it easy for traders to buy and sell assets at predominant prices.
How to use trading volume to assess market trends
To effectively use trading volume when evaluating market trends, consider the following strategies:
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best practices for trading volume
Trends, following these good practices:
- Use more indicators
: Combine trading volume with other fundamental indicators and techniques to understand even more comprehensive market dynamics.
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Conclusion
The trading volume is a critical factor in evaluating market trends and making informed investment decisions on cryptocurrency markets. Understanding the importance of trading volume and its use together with other indicators, traders can fine and more precisely a picture of the market dynamics.