Price, Volume, and Divergence are important sources of information, because the technical analysis of these opens up a further perspective on price movements, in addition to the pure observation of prices for online traders.
Online traders fundamentally rely on these indicators to determine their entry and exits in cryptocurrency. So, let’s first learn about these terms.
You must have heard traders talking about trading volume or volume and wondered what is that. Volume is the number of tokens or contracts traded within a certain period of time, for example during 4 hours. It provides information about the intensity and power of a price movement in the form of traded turnover and should therefore not be missing in any qualified and comprehensive technical analysis of market events. To facilitate interpretation, a large number of indicators have been developed over the years to evaluate the volume. If there are more trades taken, there will be more volume and vice versa.
Price and Volume, and Divergence:
Price and volume have a somewhat simple yet strange relationship. If more people are trading a said coin, the price should spike more, but it’s not always the case.
You may high volume spikes and yet observe the prices to plunge or low volume and still the prices moving upward. Such a case is called divergence. In trading, Divergence describes a pattern where price trend and indicator’s trend are opposite. The Divergence can be Bearish or Bullish.
Price and Volume, and Divergence: General Rules
Price, Volume, and Divergence Summary:
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Divergences may help traders determine their entry and exit points, as well as their stop losses. However, divergences should not be relied on primarily as they are not always visible and can also produce false trading signals.
The cryptocurrency market is subjected to high risk, DYOR.