Trading volume is a key measure of the trading activity of a particular financial asset in the market, such as a cryptocurrency. In the crypto market, it is a crucial indicator of the number of units of an individual digital asset bought or sold within a specific duration.
Trading volume is a popular technical indicator used to analyze the performance of a particular cryptocurrency before trading it. A crypto asset with a high trading volume enjoys higher liquidity. It is more actively sought after by investors, a critical measure of its popularity among traders or investors in the market.
A cryptocurrency with a higher trading volume exhibits a more reliable price action when analyzed before trading. Performing technical analysis on an asset with higher trading volume could offer a more reliable and accurate prediction of how it could move shortly while deciding whether to buy or sell it. This could potentially minimize the likelihood of incurring losses on the trade idea.
In addition to recommending when to enter the market and place a trade, the trading volume could also be a reliable technical indicator suggesting when to exit the market. It can also reveal potential trend reversals in the crypto price action. For instance, the low trading volume could indicate time to close a trade idea and take profit from an idea.