USING VOLUME FOR CONFIRMATION
As promised, here is a thread on volume analysis in trading $BTC, $ETH and $ALTS.
This is focussed on spot volume, derivatives volume is a different ball game I might do a thread on later.
As promised, here is a thread on volume analysis in trading $BTC, $ETH and $ALTS.
This is focussed on spot volume, derivatives volume is a different ball game I might do a thread on later.
Usual disclaimer, this thread is simply my personal understanding of volume analysis and its use, not a globally agreed-upon thing. This information does not constitute financial advice. You know the drill. Let's get into it.
Before we start: volume is the amount of an asset traded in time X.
Don't add sell to buy volume, it would count every transaction twice. Put simply: Total Volume = sell + buy volume / 2
Don't add sell to buy volume, it would count every transaction twice. Put simply: Total Volume = sell + buy volume / 2
To use volume in trading, I look at the volume compared to the average volume. The volume MA is a very useful tool for this.
It is a moving average reflecting the average volume of the last X candles. I've set my Vol. MA Length to 14; this can be changed in the inputs tab.
It is a moving average reflecting the average volume of the last X candles. I've set my Vol. MA Length to 14; this can be changed in the inputs tab.
Above-average volume can signal when smart money is playing. The picture below is an example of this. Even though price is only grinding up slowly, volume is significantly larger.
This tends to show accumulation.
This tends to show accumulation.
Similarly, below-average volume means smart money is sitting out the move.
For this reason, volume can serve as a handy tool to confirm S/R flips and/or breakouts.
Notice how $BTC's break of $10.5k was confirmed by high volume. Without volume confirmation, a retest is likely.
For this reason, volume can serve as a handy tool to confirm S/R flips and/or breakouts.
Notice how $BTC's break of $10.5k was confirmed by high volume. Without volume confirmation, a retest is likely.
The abovementioned can also serve as confirmation of a breakdown. See image below for a clear example where volume confirmed or refuted the break
Finally, volume can confirm trend strength or signal trend weakness. Below, $BTC was uptrending, but volume was decreasing. This signals the trend is "exhausted" and likely to break down. Contrary, if volume increased with the trend, it was likely to continue moving up.
Final note; the examples I used can be flipped. For example; the latest example might as well have been a downtrend with decreasing volume, which would have signalled a bottom is near.
I hope this helps. If you have any questions, do not hesitate to ask.
If you need an exchange, join me on FTX. I got you a 5% discount on fees :)
#a=cryptojellenl" target="_blank" rel="noopener" onclick="event.stopPropagation()">ftx.com
If you need an exchange, join me on FTX. I got you a 5% discount on fees :)
#a=cryptojellenl" target="_blank" rel="noopener" onclick="event.stopPropagation()">ftx.com
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