Written by The role of commercial volume in market psychology: understand the impact on cryptocurrency prices
The cryptocurrency, a decentralized digital currency, has gained significant attention in recent years. With its potential to interrupt traditional financial systems and provide access to financial markets for individuals worldwide, cryptocurrency has become a hot issue among investors, merchants and market participants. An aspect that is overlooked or misunderstood is the importance of the volume of negotiation in the configuration of market psychology.
** What is commercial volume?
The negotiation volume refers to the total number of shares or currencies exchanged in a particular market on a specific period of time. Repeat the general activity of purchase and sale of buyers and vendors, which can be used to measure the feeling of the market, liquidity and possible price movements. In cryptocurrencies, negotiation volumes are measured in units such as BTC (Bitcoin), Eth (Ethereum) or USDT (Tether).
The role of commercial volume in market psychology
The commercial volume plays a crucial role in the configuration of market psychology for several reasons:
- Market feeling : High negotiation volumes indicate a strong feeling of the market, with buyers and vendors participating in an aggressive purchase and sale activity, respectively. On the contrary, low commercial volumes suggest a bass or bullish feeling.
- Price volatility : Negotiation volumes can contribute to price volatility, since they influence the total number of transactions in a particular exchange. When the negotiation volume increases, it can lead to greater price fluctuation, which makes it more difficult for investors to predict market movements.
- Liquuity : High negotiation volumes indicate sufficient liquuidity in the market, allowing efficient prices discovery and minimizes the impact of volatility. The low negotiation volumes, on the other hand, can create market inefficiencies, leading to potential losses for merchants.
- Emotional intensity
: The commercial volume can also be used to measure emotional intensity in a market. High volume operations of duration occur of high volatility or emotion of the market, while low volume operations suggest quiet and rational markets.
The impact on cryptocurrency prices
In the context of cryptocurrency trade, strong negotiation volumes are associated with:
- Price rejection : When the negotiation volume is low, it can indicate a lack of trust among investors, which leads to price rejection and potential losses.
- Support/price resistance : High negotiation volumes can help identify support or resistance levels, since they tend to attract more buyers and sellers around the thesis areas.
- Market trends : The negotiation volume can be used to confirm market trends, such as the direction of a line of trend or force of a bullish trend.
Contra -intuitive strategies
While the negotiation volume is associated with high frequency negotiation strategies, there are some counter-intuitive approaches that take advantage of it for profit:
- Volume Diftuers : Buy and sell in narrow price movements can create volume differentials, which can be used to benefit from resulting price fluctuations.
- Rank range : Merchants can use low negotiation volumes to trade within a range or between two levels of support/resistance, taking advantage of limited activity in these areas.
Conclusion
In conclusion, commercial volume is an essential component or market psychology, which influences market feeling, liquidity and emotional intensity. By understanding the role of negotiation volume in the configuration of cryptocurrency prices, merchants can obtain valuable information about possible market trends and opportunities. However, it is also essential to recognize that the negotiation volume is not a reliable indicator on its own and should be used together with other factors to make informed investment decisions.