---
id: education_item.trading-volume-and-its-importance
page_type: education_article
title: "Trading Volume and Its Importance"
description: "Trading volume: how to read volume on a chart, confirm breakouts, spot divergences and abnormal crypto volumes. An analysis checklist and typical mistakes."
section: education
category: "Basics of Technical Analysis"
url: https://moonbot.eu/en/education/basics-of-technical-analysis/trading-volume-and-its-importance?format=md
locale: en
alternate_ru: https://moonbot.eu/education/basics-of-technical-analysis/trading-volume-and-its-importance?format=md
parent: https://moonbot.eu/en/education/basics-of-technical-analysis?format=md
previous: https://moonbot.eu/en/education/basics-of-technical-analysis/major-chart-patterns-in-technical-analysis?format=md
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status: published
updated_at: 2026-11-04T17:56:51+03:00
---

# Trading Volume and Its Importance

**Trading volume** is the quantity of an asset that has been bought and sold over a specific period of time. Whilst price indicates "what" is happening in the market, trading volumes explain "why" and "how significantly" this is occurring. Volume serves as an indicator of the strength of a price movement and the confidence of market participants in the current price direction. Essentially, analysing trading volume helps to separate the "noise" from the genuine intentions of major players.

Trading volume in cryptocurrencies is particularly revealing: due to high volatility and the market’s round-the-clock operation, it can fluctuate sharply over the course of a day, and these spikes often provide important insights into shifting market sentiment.

### How to Read Volume on a Chart When Trading

On most trading platforms, volume is displayed as bars (a histogram) at the bottom of the price chart. The height of each bar indicates the quantity of the asset traded over the corresponding time period – this is how traders learn to read volume on a chart when trading.

- **Color scheme:** green (or white) bars typically correspond to rising price periods, red (or black) bars - to declining prices. This helps quickly identify where trading interest is concentrated.
- **Relative analysis:** it's important to compare current volume to historical data over the past days and weeks, rather than look at absolute values. Volume analysis in trading is always context-dependent: a volume of 1,000 BTC may be low for one asset and very high for another.
- **Average volume:** many platforms show a moving average of volume (commonly over 20 periods). Volumes above this line are considered elevated, those below - reduced. This simple technique is one of the basic ways of interpreting volume on a chart in trading, enabling you to distinguish between normal fluctuations and significant spikes in activity.

### Confirming Moves with Volume

- **Healthy move:** price increase on rising volume and price decline on rising volume are considered “healthy” moves. This shows that many participants support the current direction.
- **Weak move:** price increase on declining volume or price drop on declining volume signal a weak move. Such trends often lack strength and may reverse.
- **Breakouts with confirmation:** when price breaks a key support or resistance level on high volume, it’s a strong signal that the move will likely continue. Breakouts on low volume often turn out to be false. That is precisely why trading volumes are used as a filter to assess the quality of signals.
- **Accumulation and distribution:** sideways periods - where price trades in a narrow range without forming an uptrend or downtrend - accompanied by increasing volume may indicate accumulation (buying) before a rally or distribution (selling) before a drop. In such cases, analysing trading volumes allows us to identify hidden activity that is not reflected in the price itself.

### Price-Volume Divergences

A divergence occurs when price and volume move in opposite directions, often preceding a trend reversal.

- **Bullish divergence:** price makes new lows while volume declines. This may indicate weakening bearish pressure and a potential reversal upward.
- **Bearish divergence:** price hits new highs while volume decreases. This shows declining buying interest at high levels and a possible reversal downward.
- **Volume spike:** a sudden spike in volume at extreme price levels (panic selling at the bottom or euphoric buying at the top) often marks the end of a trend. In the context of cryptocurrencies, such spikes often coincide with abnormal trading volumes caused by news events or liquidations on futures markets.

### Volume Features in Crypto Markets

- **24/7 trading:** crypto markets operate around the clock, so volume is unevenly distributed. Activity peaks usually occur during overlap of US, European, and Asian sessions. Tracking session times helps to interpret cryptocurrency trading volumes more accurately.
- **News impact:** crypto markets are highly sensitive to news, which can cause sharp volume spikes. It’s important to distinguish volume driven by technical setups from news-driven volume. At such times, abnormal trading volumes in cryptocurrencies are often observed; these can be either a sign of a strong trend or an indication of panic or profit-taking.
- **Different Exchanges:** volume figures may vary significantly across exchanges. For analysis, use data from the most liquid platforms or aggregated indicators. This is particularly important because trading volumes on illiquid exchanges can distort the overall picture.
- **Wash trading:** some exchanges artificially inflate volumes. Focus on reputable platforms with real trading activity. Failing to take this factor into account is one of the most common mistakes made when analysing trading volumes.

### Practical Principles for Working with Volume

1. **Confirmation, not foundation:** use volume to confirm signals from price, levels, and patterns — not as a standalone entry trigger.
2. **Context over absolute values:** always compare current volume to average values over recent weeks and months.
3. **Complex analysis:** combine volume analysis with other tools: support/resistance levels, candlestick patterns, chart formations.
4. **Patience during low volume:** in times of low trading activity, it’s better to avoid active trading and wait for volume to increase.

When you are learning to read volume on a chart in trading, it is important not to try to find the ‘perfect’ signal in every bar, but to assess the overall picture: where there was a spike, how it relates to levels and patterns, and what this tells us about the balance of power between buyers and sellers.

**How to Choose the Right Approach to Volume Analysis**

Beginner traders should focus on the most basic principles: confirming breakouts with high volume and identifying divergences at key levels. Avoid advanced intraday volume analysis until you gain experience with price structures.

As you gain more experience, you can move on to more sophisticated techniques: analysing volume clusters, assessing the imbalance between buys and sells, and identifying anomalous cryptocurrency volumes as indicators of significant news events or the actions of major players.

### Checklist for Analyzing Trading Volume

- Enable volume display on your trading chart.
- Compare current volumes with the average figures for the past few weeks – this will help you understand how much higher or lower they are.
- Assess whether the price direction aligns with volume trends: a rise on increasing volumes is a sign of strength, whilst a rise on falling volumes is a cause for caution.
- When analysing breaks of key levels, be sure to pay attention to cryptocurrency trading volume: a breakout on high volumes is more reliable.
- Look for divergences between new price extremes and volume – these are early signals of a weakening trend.
- Take trading session times into account when assessing activity: a surge during a "quiet" session may be more significant than one during peak trading hours.
- Avoid active trading during periods of abnormally low volume – such movements often lack real support.
- Use volume as confirmation, rather than as the primary signal.
- If you spot abnormal cryptocurrency volumes, check the news backdrop and the state of the futures market – such spikes are often linked to liquidations or major announcements.
- Always check the source of volume data: prioritise liquid exchanges and aggregated figures.

### Common Mistakes When Using Volume

1. Trading solely on volume analysis without considering price action.
2. Ignoring volume when assessing the strength of breakouts or reversals.
3. Comparing absolute volume figures without taking the historical context into account distorts one’s perception of volume in trading.
4. Expecting high volumes with every price movement: not every movement is accompanied by a surge in activity.
5. Failure to take into account the characteristics of trading sessions and the impact of news on trading activity is particularly critical for cryptocurrency trading volumes.
6. Attempts to accurately predict the direction of price movement based solely on volume - volume does not provide clear-cut signals; it merely reinforces or weakens other signals.
7. The use of data from illiquid or dubious exchanges, where statistics may be distorted.

### The Role of Abnormal Volumes and a Holistic Approach

**Abnormal volumes** in cryptocurrencies are not simply ‘a lot of trades’, but a signal that must be interpreted within its context: where they occurred, at what price level, alongside what price dynamics, and at what time. It is often precisely these spikes that mark important turning points on the chart.

**Analysing volume** in trading is not about finding a ‘magic button’, but about the ability to recognise the strength and weakness of price movements and to distinguish genuine market sentiment from false signals. Once you have learnt to read volume on a chart and correctly correlate it with price and levels, you will be able to make more informed decisions and avoid trades with a low probability of success.

**Trading volume** is the voice of the market, reflecting the strength and conviction of market participants. It does not provide ready-made entry signals, but it helps to assess the quality of price movements and increases the reliability of trading decisions. Start with the basics: confirming breakouts and looking for divergences, then gradually deepen your understanding of this important analytical tool.

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## Related

- [Basic Indicators for Beginners](https://moonbot.eu/en/education/basics-of-technical-analysis/basic-indicators-for-beginners?format=md)