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By: www.ProfitableInvestingTips.com
Short and medium term Bitcoin prices are driven by
market sentiment. Thus Bitcoin traders commonly rely
on technical indicators more so than long term
fundamentals. A useful but sometimes perilous
technical indicator for Bitcoin is one that tracks
trading volume.
Volume indicators for trading Bitcoin include the
following: on balance volume, the
accumulation/distribution line, money flow index,
Chaiken oscillator, Chaikin money flow, and ease of
movement.
What Does Bitcoin Trading Volume Tell You?
If you are trading alt coins, trading volume is a good
indicator of the viability of the token. Bitcoin is an
established cryptocurrency so viability is not the issue.
By knowing how much Bitcoin trading is going on
every day you have an idea of the current degree of
interest in buying and selling this token.
High trading volume in any market generally indicates
that more buyers are coming in and more buying is
taking place. It can also mean that an underlying asset
is in trouble and the price is going to fall. In addition
high trading volume also indicates sufficient liquidity
so that you are unlikely to get trapped in a position if
the market falls.
Bitcoin Trading Volume Risks
There is one big risk in relying on trading volume
indicators with Bitcoin. It is the high incidence of
Bitcoin wash trading. Wash trading is typically done
to manipulate the market. Traders sell and then
immediately repurchase Bitcoin. This gives the
appearance of much more interest in trading the token
than actually exists.
When other traders are fooled into thinking that there is
more interest in buying Bitcoin they can assume that
the price is going up. So they buy and do indeed send
the price up. Because there is no underlying reason for
this to happen the price goes back down again when
the Bitcoin wash trading stops. While Bitcoin volume
indicators can be very useful tools, traders need to be
aware of this risk.
Using On Balance Volume for Trading Bitcoin
On balance volume uses trading volume to predict
changes in the prices of stocks or cryptocurrencies.
When the closing price of Bitcoin is higher than the
previous day, on balance volume is the previous day’s
number plus the current day’s volume. When the price
goes down it is the previous day’s volume minus the
current day’s volume.
When the closing price is the same as the previous day,
the on balance volume number stays the same. The
rationale for this indicator is that it helps see how
trading on large investors and traders differs from that
of so-called mom and pop investors. The indicator is
meant to help indicate market momentum upward or
downward.
Accumulation/distribution Line in Bitcoin Trading
This indicator is like on balance volume in that it tracks
volume and price. It is used to help determine how
strong a trend is. It does this by looking for differences
between price and volume flow.
It gives you a line on the chart where a rising line
confirms an upward price trend while a falling line
indicates a downward trend. When a trader follows
this indicator for several days it may be sufficient time
to determine if temporary high trading volume such as
from wash trading was distorting the market.
Using Volume Indicators to Make Sense of Bitcoin
Prices
Bitcoin tends to fluctuate a lot. The rationale for using a
volume indicator is to see just how many traders are
propelling those price changes. When there are a lot of
individuals buying Bitcoin it generally indicates that
the price is heading up and it will continue to do so.
When the price goes up or down and trading volume is
very low a trader needs to be cautious about jumping
into the market.
For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com.

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Volume Indicators for Trading Bitcoin

  • 2. Short and medium term Bitcoin prices are driven by market sentiment. Thus Bitcoin traders commonly rely on technical indicators more so than long term fundamentals. A useful but sometimes perilous technical indicator for Bitcoin is one that tracks trading volume.
  • 3. Volume indicators for trading Bitcoin include the following: on balance volume, the accumulation/distribution line, money flow index, Chaiken oscillator, Chaikin money flow, and ease of movement.
  • 4. What Does Bitcoin Trading Volume Tell You?
  • 5. If you are trading alt coins, trading volume is a good indicator of the viability of the token. Bitcoin is an established cryptocurrency so viability is not the issue. By knowing how much Bitcoin trading is going on every day you have an idea of the current degree of interest in buying and selling this token.
  • 6. High trading volume in any market generally indicates that more buyers are coming in and more buying is taking place. It can also mean that an underlying asset is in trouble and the price is going to fall. In addition high trading volume also indicates sufficient liquidity so that you are unlikely to get trapped in a position if the market falls.
  • 8. There is one big risk in relying on trading volume indicators with Bitcoin. It is the high incidence of Bitcoin wash trading. Wash trading is typically done to manipulate the market. Traders sell and then immediately repurchase Bitcoin. This gives the appearance of much more interest in trading the token than actually exists.
  • 9. When other traders are fooled into thinking that there is more interest in buying Bitcoin they can assume that the price is going up. So they buy and do indeed send the price up. Because there is no underlying reason for this to happen the price goes back down again when the Bitcoin wash trading stops. While Bitcoin volume indicators can be very useful tools, traders need to be aware of this risk.
  • 10.
  • 11. Using On Balance Volume for Trading Bitcoin
  • 12. On balance volume uses trading volume to predict changes in the prices of stocks or cryptocurrencies. When the closing price of Bitcoin is higher than the previous day, on balance volume is the previous day’s number plus the current day’s volume. When the price goes down it is the previous day’s volume minus the current day’s volume.
  • 13. When the closing price is the same as the previous day, the on balance volume number stays the same. The rationale for this indicator is that it helps see how trading on large investors and traders differs from that of so-called mom and pop investors. The indicator is meant to help indicate market momentum upward or downward.
  • 15. This indicator is like on balance volume in that it tracks volume and price. It is used to help determine how strong a trend is. It does this by looking for differences between price and volume flow.
  • 16. It gives you a line on the chart where a rising line confirms an upward price trend while a falling line indicates a downward trend. When a trader follows this indicator for several days it may be sufficient time to determine if temporary high trading volume such as from wash trading was distorting the market.
  • 17. Using Volume Indicators to Make Sense of Bitcoin Prices
  • 18. Bitcoin tends to fluctuate a lot. The rationale for using a volume indicator is to see just how many traders are propelling those price changes. When there are a lot of individuals buying Bitcoin it generally indicates that the price is heading up and it will continue to do so. When the price goes up or down and trading volume is very low a trader needs to be cautious about jumping into the market.
  • 19. For more insights and useful information about investments and investing, visit www.ProfitableInvestingTips.com.