The power of negotiation volume: comprising a -chave indicator in cryptocurrency markets
In the world of cryptocurrencies, the volume of negotiation is often misunderstood as simply a reflection of market feeling. However, it is much more than that. The volume of negotiation, particularly its absolute and relative values, is one of the most critical indicators in cryptocurrency markets. In this article, we will delve deeper into the meaning of the negotiation volume and why it should be considered a -chave metric for traders, investors and market analysts.
What is negotiation volume?
The volume of negotiation refers to the total number of coins or tokens negotiated for a specific period, usually 24 hours. It is calculated by multiplying the average daily exchange rate by the total number of negotiations performed within this time. In other words, it is an instant of how many times an asset has been bought and sold within a given day.
Why is the volume of negotiations important?
1.
- Trend Indicators : A strong negotiation volume may be an indicator of a trend market as it suggests that the asset is gaining popularity and moment.
- Risk Management : Trading volume helps traders manage risk by providing a reference to possible losses. If a merchant sells at an inflated price (due to the high volume), but then buying at a lower price, he may minimize possible losses.
- Feeling in the market : An decrease in negotiating volume may indicate a feeling of the low market, as buyers may be decreasing their activity.
Types of negotiation volume
- Absolute Volume : Refers to the total number of transactions performed over a given period.
- Relative volume ratio (RV) : This measures the percentage change in the absolute volume within a specific deadline compared to a base line value (eg 100). A higher VD ratio indicates increased negotiation activity.
** Takeaways
- Volume is not affected by market volatility : When the price of a cryptocurrency is volatile, its negotiation volume can increase temporarily, but this does not necessarily mean that it will continue to gain strength.
- Volatility is relative : Although high negotiation volumes may indicate an increase in activity, low volumes may still be indicative of a strong market feeling or future correction.
- Market moment : A significant drop in negotiation volume can signal a change from a purchase trend to a sales trend, indicating potential price weakness.
Best practices to use the volume of negotiation
- Define a base line value
: Establish a reference for your negotiating system by tracking historical trading volumes of the asset you are interested in.
- Monitor and Adjust : Keep an eye on trading volume metrics over time and make adjustments to your strategies as needed.
- Combine with other indicators : Use the negotiation volume as one of the many tools to analyze market activity rather than depending on it.
Conclusion
In conclusion, the volume of negotiation is a powerful tool for understanding cryptocurrency markets and making informed decisions about buying and selling assets. By tracking absolute and relative negotiation volumes, traders, investors and analysts can obtain valuable information about feelings, trends and risk management strategies in the market. As the cryptocurrency space continues to evolve, it is essential to remain up to date with the latest developments in trading volume analysis to effectively navigate markets.
Additional resources
- Coinmarketcap: A comprehensive cryptocurrency price database and trading volumes.
- Cryptocompact: Provides real -time market data, including trading volumes for various assets.
- TradingView: offers a variety of technical indicators, including negotiating volume charts.