What is Volume Trading and How to Use It?

Bittime - Trading volume is the total number of shares or contracts traded in a market during a certain time period. Trading volume is a technical indicator that shows the activity and liquidity of an asset or market. 

Investors often use trading volume to confirm the existence or continuation of a trend, or the existence of a trend reversal. In simple terms, trading volume can validate the price movement of an asset, which can then help investors make decisions to buy or sell that asset.

Volume and Momentum Trading

Volume trading can help investors identify momentum in an asset and confirm trends. If trading volume increases, prices generally move in the same direction. This means that if an asset continues to rise in an uptrend, the trading volume of that asset should also increase and vice versa.

For example, shares of company ABC increased 10% in the last month. The investor is interested in the company and wants to buy 1,000 shares. 

They perform fundamental analysis and see that the company's revenue and profits have continued to increase over the past year. However, investors are unsure whether the stock will continue to rise and are worried that the trend will reverse. 

In these cases, trading volume analysis can be very useful. Investors see that there has been an increase in trading volume for ABC shares over the past month. They also noticed that the trading volume was the highest that ABC stock had experienced in the last two years, and that the stock continued to rise. 

This indicates that ABC is gaining momentum and gives investors confidence that the trend will continue to rise. Thus, the increase in trading volume makes investors buy 1,000 shares of ABC.

Check Today's Crypto Market:

Volume Trading and Trend Reversals

Trading volume can also signal when investors should take profits and sell assets due to low activity. If there is no relationship between trading volume and the price of an asset, this indicates weakness in the current trend and a possible trend reversal.

For example, shares of company ABC continued their upward trend over the next five months and increased 70% in six months. Investors see that the share price of company ABC is still in an upward trend and continue to hold the shares. 

However, they saw that the trading volume of the stock had decreased significantly in the last few weeks, while the share price was still rising. This shows that there is a mismatch between trading volume and stock price, which could indicate that the uptrend will end soon. 

The investor decides to sell ABC shares and take profits before the share price falls.

Also read:

How to Use Volume Trading

To use trading volume as a technical indicator, investors can look at the asset's trading volume in the last 24 hours, last 7 days, or last 30 days. Investors can also view asset trading volumes in USD or BTC units , and also as a percentage of total market volume. 

Investors can view and compare trading volumes of assets on various platforms and websites that provide market data and charts, such as CoinMarketCap.

Volume trading can be used to analyze market trends and patterns. For example, investors can see whether an asset's trading volume increases or decreases along with price changes. 

Investors can also see whether the trading volume of an asset is directly proportional to or opposite to the trading volume of the overall market.

Conclusion

Trading volume is one of the important indicators for analyzing the market. Trading volume shows how active, liquid and stable an asset is in the market. Investors can see and use trading volume to confirm the existence or continuation of a trend, or a trend reversal. 

By trading volume, investors can get useful information and signals to make smart and profitable trading decisions.

Check Crypto Prices Today:

How to Buy Crypto on Bittime

You can buy and sell crypto assets in an easy and safe way via  Bittime .  Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti. 

To be able to buy crypto assets on  Bittime ,  make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into  your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Learn  Complete Guide How to Buy Crypto on Bittime .

Monitor price chart movements  for Bitcoin (BTC) ,  Ethereum (ETH ) ,  Solana (SOL)  and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also read:

What is Day Trading?

What is Margin Trading?

What is Arbitrage Trading?

What is Cross-Border Trading?

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.