Trading 101: Most Profitable Volume Crypto Trading Strategies

2021/08/03 02:06:17

In the crypto market, where price fluctuations are sensitive to changes in supply and demand, volume analysis is essential for traders and investors. By definition, volume is the amount of a particular asset that has been traded over a specified period. Typically, most trading platforms indicate the volume traded. This is usually represented at the bottom of the price chart – usually as bars.

Representation of Trading Volume On Bitcoin Chart | Source: BTC/USDT

The Basic Principles of Volume Trading Strategies

Through volume analysis, a trader can recognize the stability and weakness of a trend. A trend is when the price of a crypto has taken a certain direction for a longer period.

The color of the volume bar on a chart is either red or green. The red bars indicate the volume being sold, while the green bars indicate the volume being bought. Typically, large volumes are shown when the bars are significantly higher than the rest. Here are some of the key points to consider when analyzing the volume:

  • At the beginning of a trend, regardless of whether it is an upward or downward trend, the volume increases. Likewise, the volume increases when the price breaches support and resistance levels.
  • Volume analysis can be used to determine the strength of a trend. If the price trend reaches a new high without the volume also reaching a new high, it is a weak trend indicating a potential bearish reversal. Similarly, if the market is in a bearish trend and the price records lower lows, but the volume doesn’t, it is an indicator of a weakening bearish trend. It also signals a potential bullish reversal.
  • A sudden spike in volume indicates a high level of trading among market participants. The volume peaks have a short-term stopping effect on the price movement. Here it may make sense to trade the respective correction contrary to the current price development. For sentimental analysis, this marks the beginning of a new trend or a reversal of the existing trend.
  • Minimal price changes, or when the market is trending sideways accompanied by low volume, indicate a lack of interest by the traders and investors. In this case, there may be rapid reversal movements. Typically, this represents a moment of price consolidation. That means that traders can anticipate either a trend reversal or continuation. New impetus is needed to attract more market participants. However, you should always be prepared to catch the new trend, often signaled by a sudden spike in volume.

Profitable volume Trading Strategies

There is the basic rule that the price cannot rise far without the volume confirming the direction. Beginners should always focus on trading in liquid markets with a high trading volume, as this results in lower trading fees and fast execution of orders. With this in mind, here are some of the volume trading strategies:

Trend Confirmation

As we’ve noted earlier, volume can be used to confirm the existing market trends or signal their reversal. The volume increases with movements in the direction of an actual trend. If a decline in volume occurs, it is a sign that the trend could flatten out while the market enters a period of consolidation.

The increasing volume illustrates the belief of sellers and buyers to steer the price either down or up. The volume should preferably be lower if the price changes in the trend direction and larger if it shifts against the patterns

The Impact of Volume On Bitcoin Price Action | Source: BTC/USDT

Identifying Price Reversals

A declining volume can represent a potential price reversal. This means that a decline in volume over the course of a downtrend or uptrend indicates a possible reversal. A trend can continue over a longer period in terms of decreasing size. Still, a decreasing volume can usually mean that the trend is getting worse.

In an uptrend, a decrease in the volume means that fewer traders are bullish. This indicates that the bullish trend is weakening. Remember that the market is driven by demand and supply. When demand increases, so does the price. Similarly, when an asset in a bearish trend experiences a drop in volume, sellers in the market are dropping – indicating that the momentum is weakening.

The occurrence of volume spikes within a trend often precedes a trend reversal. If the market is in a bullish trend and there’s a sudden spike in sell volume, it should signal the beginning of a bearish trend. That’s because volume spikes are often a result of changes in market sentiment. Traders should pay attention to the volume in the next price recovery. In cases where the rally volume is lower than the volume peak are good signs that the price will continue to fall.


A volume is a valuable tool, and there are several ways to use it. It can provide fundamental insights in day trading and is often considered as an ideal tool to determine the market sentiment. In bearish and bullish markets, the volume being sold and bought are significantly higher. The steady increase in volume helps traders identify potential trend reversals and trend continuation.

Finally, if you think all of this is too much to consider while you trade, consider checking the most reliable KuCoin Trading bot. It is completely autonomous and needs no manual intervention. Keep following the KuCoin blog for educational content related to trading, investing, and more. All the best!

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