Volume: the truth about a move
Lesson 24 of 39 in the course “Crypto”. Free, with animations and a quiz.
Volume is how many coins or contracts were bought and sold during a candle. It is drawn as bars under the chart. Here price sits in a range (moving between a ceiling and a floor) on low volume. The market is storing energy.
A breakout on big volume: a lot of money is taking part in the move. Such a breakout is usually more reliable than a quiet one. It is a strong argument for the breakout, not a guarantee.
Price made a new high, but volume is small. The move is hollow: there are almost no new buyers. It is a warning that the rally is weakening, not an order to sell.
Price turned down. The trap: the push above the high without volume looked like a rally. It was a false breakout: price went past the level and quickly came back.
Check yourself
- A breakout on big volume is usually...
Correct answer: More reliable than a quiet one. Big volume shows real money is behind the move. That raises trust in the breakout but does not guarantee the outcome. - A new high without rising volume is...
Correct answer: A warning the rally is weakening. There are few new buyers, nobody backed the move. A high like that easily turns out to be a false breakout. - What does volume show?
Correct answer: How much was bought and sold. Volume is the amount bought and sold over a period. It shows the strength and interest behind a move, not the future direction.