6 Trading Volume Indicators You Should Know

Cryptocurrencies are valuable and complex, making them difficult to manage. To manage this market, it is important to do technical analysis using different indicators.

Among these indicators, trading indicators play an important role in providing information on market trends, reversals, and the possibility of making money in the market. So let’s discuss trading indicators and introduce six of the most useful ones that can help you become a successful crypto trader.

What are Volume Trading Indicators?

There are many Cryptocurrency technical sections that provide information on the different aspects of a cryptocurrency. One of the most important indicators among them is the volume indicator, which depends on the volume of the transaction, that is, the amount of cryptocurrency traded at a certain time.

Using volume indicators in trading offers many advantages. They are the perfect tools for determining the price of future digital assets. These indicators show market trends and tell you about their strength.

Additionally, volume indicators allow you to monitor a fund’s liquidity in the market and gain insights into market reversals and accumulation patterns. Therefore, this is one of the most popular and valuable audio signals in the crypto market.

1. Balance Sheet (OBV)

Bitcoin/Tether US chart with OBV

On-Balance Volume is one of the oldest trading indicators in the financial markets, developed by Joseph Granville, a market forecaster in 1963. OBV uses the flow of money (or volume) to indicate a predict price changes for commodities or other assets. In simple terms, OBV compares a stock’s volume to its price.

To calculate the OBV, add and subtract the current trading volume from the original OBV value. The combination of the initial OBV and the trading volume is necessary when the cryptocurrency price closes earlier than the previous day. On the other hand, you will subtract the trading volume if the cryptocurrency closes at a lower level than the previous day.

OBV is a time indicator that allows you to use changes in volume to identify price trends for a particular asset. It provides insights into investor sentiment, allowing you to predict trends up or down. It provides indicators that can be compared with volume histograms.

2. Connection Line / Distribution

Bitcoin/Tether US Chart with Accumulation/Distribution Line

The Accumulation / Distribution line is a good signal for cryptocurrency traders. Considering the cumulative amount and the cash flow, it will be a valuable tool for monitoring the flow of money in or out of a crypto project. To calculate the A/D, simply add the initial A/D to the current cash flow amount.

So, how do you define the Distribution line? Yes, the translation is easy, because the values ​​only depend on the direction of the line. An upward pointing line indicates a bullish trend, while a downward pointing direction indicates a bearish trend for the indicator.

In addition, ADL can notify you of a possible change and provide information on future price movements. It can detect negative and positive differences between volume and price, providing signals for bullish trends.

3. Financial Index (MFI)

Bitcoin/Tether US Chart with Money Flow Index (MFI)

The Money Flow Index (MFI) is considered one of the best indicators for evaluating the trading pressure for a cryptocurrency in the market. The MFI considers the price and the time to look at the buying or selling pressure in the market.

The performance of the MFI indicator is similar to using the Relative Strength Index (RSI), but the main difference is the volume. Sometimes, this indicator, also known as RSI compared to volume, can provide information on changes in volume.

The MFI is a line from 0 to 100, with higher values ​​indicating higher buying pressure. When the indicator rises to the 80 to 90 mark, it may be a sign of overbuying in the market. Likewise, when the MFI line approaches 10 or 20, it can indicate overselling of the cryptocurrency.

4. Chaikin Oscillator

Bitcoin/Tether US chart with Chaikin Oscillator

Another way to check the volume of a digital asset is by using the Chaikin Oscillator indicator, developed by Mark Chaikin. This tool allows you to measure ADL momentum by drawing a line that follows positive and negative changes in the price of a cryptocurrency.

To draw the Chaikin Oscillator line, you need to know the difference between the long-term and short-term moving averages (EMA). You can do this by subtracting the 10-day EMA from a 3-day EMA, allowing you to see convergence and divergence in ADL momentum.

The Chaikin Oscillator is a powerful indicator for traders to use for trend predictions. It can easily detect seasonal variations and can be used to predict the turn of the tide.

5. The Chaikin Money Flow (CMF)

Bitcoin/Tether US Chart with Chaikin Money Flow

The Chaikin Money Flow (CMF) oscillator is a technical analysis indicator designed by Mark Chaikin. This indicator shows the amount of money flow of a currency for a specific period of time, showing the flow of money in a crypto project and seeing the buying and selling. Using this metric, the CMF can evaluate changes in sales pressures.

The CMF shows the change in trading pressure through a value from 1 to -1. When the CMF is 1, it indicates high selling pressure. Likewise, if the value of the CMF is -1, it means increasing buying pressure. The indicator is very valuable for calculating the various trends in the trade and predicting the future trends.

6. Ease of Movement (EOM)

Bitcoin/Tether US chart with EOM

Ease of Movement (EOM) is an important oscillator for crypto technical analysis. It is a measure of how easily a cryptocurrency is moved based on average volume. The indicator is good for cryptocurrencies because it accounts for the complex market behavior, allowing crypto traders to predict trends without worrying about fluctuations.

A high and positive value for EOM indicates that the crypto price is going up with a low price. Likewise, a negative value indicates that the stock is falling in low volume. Ideally, you should use EOM as a secondary indicator to combine with some other indicators such as moving average, RSI, or​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

Using Volume Indicators for Technical Insights

Trading indicators play an important role in technical analysis because they provide important insights into market trends by analyzing trading volume. Incorporating these indicators into your trading strategy can help you make decisions about market trends, investor interest, trading requirements, and future trends. measures.

However, it is important to understand the use of volume indicators and basic analysis indicators and techniques for a better way to trade.

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