If you are interested in getting involved in the world of cryptocurrency investments but aren’t sure how it all works, you should find some assurance in the knowledge that many of the same techniques and strategies that apply to other assets like stocks also apply to trading crypto. As a result, if you’re familiar with one, you should have a pretty good hold on the other. That doesn’t mean that everything is the same in terms of the nuts and bolts of how trades are executed and the like. But it does mean that, once you have the ins and outs of pulling off crypto trades down pat, you should be able to fall back on some tried and true strategies.
Examining trading volume certainly falls into that category of established strategies for trading assets. And it turns out that is especially effective when figuring out how to approach trades in Bitcoin and other cryptocurrencies. Perhaps you’re a trading novice, in which case you may choose to get your exposure to digital coins via a trading program, one designed to avoid Bitcoin scams. Once you have that in place, you don’t need to do a thing except make the initial investment and let the profits roll in. But, if you’re the type who likes to control your investing on your own, you should read on to see how trading volume comes into play in that process.
- What It Is
Simply put, trading volume is a measurement of the number of trades made with an asset. It isn’t concerned with the value or price of the asset at all. It simply counts the trades, both buying and selling, made with the asset during a given period. This information can be used by traders to determine the kind of interest and buzz around an asset, both positive and negative.
- What It Means
The way that traders most often use trading volume information is to determine the viability of a trend. If price movement is accompanied by significant volume, it usually means that the movement is something that is reliable. By contrast, a movement up and down that is not associated with the volume of any great amount means that the trend could be nothing more than a momentary flare-up.
- How It Applies to Crypto
You can use trading volume in several ways when it comes to cryptocurrency investing. You might check to see if a certain coin is making a move in relation to others in the market. You can also use to judge if the cryptocurrency asset class is legitimately surging or falling and attempt to catch that wave. Considering that cryptocurrency tends to lean toward extreme volatility, using volume to spot legitimate trends is crucial.
Trading volume is an important tool that analytical investors use when trading. Using it in conjunction with cryptocurrency trading can be extremely effective in this somewhat new field of investment.