Technical study of cryptocurrencies and trading strategies need indicators. Based on historical price movement, cryptocurrency volume, and other data, they anticipate market direction. The most prominent crypto indicators include MACD (Moving Average Convergence Divergence), RSI (Relative Strength Index), and so on, however this post will focus on volume indicators.
Volume indicators show trade volume changes. This information is essential since crypto trade volume shows trend strength. If the price movement is favorable and volume is rising, the trend is strong and likely to remain. The most common technical techniques for determining volume are.
On Balance Volume (OBV)
On Balance Volume is a typical volume indicator. It correlates price with cumulative total volume. In 1963, Joe Granville founded OBV. The process is simple: if today’s cryptocurrency or currency closing price is greater than yesterday’s, today’s trading volume is added to the prior OBV figure. Trading volume is removed from the prior OBV if today’s closing price is lower. OBV might confirm the trend by moving with the price or suggest a reversal by moving against it.
Accumulation/Distribution Line (ADL)
Accumulation/Distribution considers accumulated volume like OBV. Know the Money Flow Volume to compute the A/D. Money Flow Volume = ((Close – Low) – (High – Close)) / (High – Low) * period trading volume. Current Money Flow Volume must be added to prior A/D to compute current A/D.
Accumulation/Distribution Line moving up suggests price is rising since most traders are purchasing this coin. If the line falls, the bear market is coming. Divergence between price movements and ADL suggests the trend will soon alter to match the indicator.
Money Flow Index (MFI)
The Money Flow Index measures purchasing and selling pressure. Similar to the Relative Strength Index, but volume-based. An MFI line travels between 0 and 100. Rising MFI implies purchasing pressure, declining MFI shows selling pressure. If the Money Flow Index is over 80, the crypto market is overbought and coins may fall in price. If the figure is below 20, the bitcoin market is oversold and may rise.
Chaikin Oscillator
ADL momentum is measured by drawing a line between positive and negative values in the Chaikin Oscillator. Subtracting the longer-term exponential moving average from the shorter-term ADL exponential moving average forms the line. ADL momentum and purchasing pressure are strong with good value. Highly negative signifies tremendous ADL momentum and selling pressure. Crypto traders may forecast trend shifts by tracking momentum fluctuations, which generally precede trend changes.
Chaikin Money Flow (CMF)
Chaikin Money Flow measures Money Flow Volume across time. Money Flow Volume measures buying and selling pressure, while CMF sums it over time. Buying pressure is stronger when CMF is 1 and selling pressure is higher when -1. This indicator can measure cryptocurrency purchasing and selling pressure and anticipate crypto trends.
Ease Of Movement (EOM)
Ease Of Movement oscillates between positive and negative ratings. When EOM is positive, cryptocurrency prices rise on low volumes. If values are very negative, crypto prices drop on modest volumes. In both situations, low quantities suggest reversal. This indicator’s moving average might trigger crypto trading alerts. Ease Of Movement is frequently utilized as a supplementary indication alongside technical indicators and charts.