Why Traders Say Volume Is Crypto Price Indicator of Choice

A poll recently conducted by CoinDesk Markets revealed that volume was the indicator of choice for 39 percent of respondents, while the Relative Strength Index came in second place at 29 percent of the total vote.

Professional traders and chartists use volume to great advantage, following the mantra that if the price falls along with volume, it generally marks a point of exhaustion, signaling a reversal will happen soon.

While conversely, a rise in price with a drop in total volume presents a stronger case for the bears as they drag prices for a lower bid, usually upon meeting a key resistance zone.

"I think volume is a good indicator. Higher price and low volume usually lead to a drop in price," he said.

"Volume speaks to the sincerity of the price action it is tied to. Volume for me is imperative."

If the volume is bullish and moving higher, but the price is dropping, it's usually is a tell that traders hoping the price will rise are in danger of being trapped and are forced to sell for lower than they entered.

Volume on crypto exchanges might not actually represent that buyers will follow-through with an intended purchase.

Volume can be faked with what's known as "Wash trading," a term that refers to when traders put in orders for other traders to see, but withdraw them before they are filled.

It is true that particular exchanges have been caught up in a scandal surrounding true volume being displayed incorrectly, thereby manipulating traders into entering an unprofitable and risky trade.

"If volume diverges from a trend, e.g. price continues to rise while volume falls off, then I start to think, 'Perhaps this trend is weakening.'".