Volume Indicator - Crypto Academy / S4W2 - Homework Post Professor [@kouba01]

This is the first time when I am going to participate in the Era of SteemitCryptoAcademy. Here is my assignment for the assignment Crypto Trading With Volume Indicator. As professor wants students to explore a new platform so for this I will be exploring the Coinigy platform for the charts.

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1. Explain the volume indicator in your own words.

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As per my understanding Volume indicator is nothing but the amount that has been traded between the buyer and the sellers. The volume of a particular asset may vary from exchange to exchange. It is denoted in the Verticle bars in the Asset chart as you can see in this picture. The volume indicator is very useful in trading and it can be helpful to find out the current market sentiments, trends, breakouts etc.

Here you can see the 24-hour volume of Dogecoin on all the exchanges. however, in the next picture, you can see that the Volume on exchanges is different which shows Dogecoin has been traded on exchanges with different participants.

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2. Use a platform other than Tradingview to present the volume indicator on a chart and show how to configure its parameters by justifying your choices.

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I am going to introduce you to Coinigy which is the best alternative to tradingview.com. it has a really good attractive user interface and it feels good to play with colors here. In order to Configure Volume Indicator, we need to follow the below steps. I really like its colorful UI.

Step:1-- Go to https://www.coinigy.com/ and create a free account.
Step:2-- Open chart for example we will go with BTC chart.
Step:3-- Click on the Indicator section

Step:5-- You need to type Volume in the Search box and select the first one as it is the built-in volume indicator.

Step:6-- Also there is an option to implement moving average on the Volume, to be honest personally I don't use any moving average on the chart. However, if I need to use MA on the chart then 20 Simple Moving Average would be my favorite. This moving average works pretty decently even with the combination of 200 MA and 20 MA I used to do scalping. You can change the settings or remove it as per your preference.

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3. What is the link between Volume and Trend and How to use volume to predict a trend reversal?

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The volume and trend both are related to each other as Volume tells the real interest of the participants and if they both are not moving in the same direction then we may see trend reversal. Also, Volume diversion is another great sign of Trend reversal as it shows the price is moving up however the buyers are no more interested in buying and this applies with the downtrend as well. Let me show you the relation over the chart. Volume diversion looks the same as RSI momentum diversion.

Let's have a look at this chart in this you can clearly see the price of ETH is going up and along with that the Volume is also increasing. It shows the uptrend is powerful here.

Now let's have a look at the second scenario where the price is going down but the volume is still stable or going down. This shows although the price going down however the sellers are no more interested in selling it and the trend is getting weaker. After some time the trend reversal happened and the price started moving up. This thing is called Bullish Volume Diversion.

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4. How to use the volume to have a signal confirmation?

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The volume is like the Mental health of the Price and it actually helps us to know the inside of the body. Volume can be very helpful to identify fake breakouts as whenever the price is breaking any kind of range there should be huge participation. As the Breakout/Breakdown are the Areas of Interest for the Traders so the Volume should be very good especially in the volume Candle.

In the above chart, you can see when the ETH breaks an important support zone 2880 which is also Fib Retracement level. You can see the Volume is really huge as compared to its previously traded volume. This confirms that the Breakout is genuine and it may go even more down.

Here is another example where we got Fakeout. This is a double bottom pattern which should give a target of at least depth of the neckline however in this case you can when the neckline is broken the volume was not in the support, as a result, it dropped without even giving the target.

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5. How does the volume reflect the evolution of prices in the charts and why does the volume sometimes anticipate the price?

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As we know Volume is the amount of units is being traded between the buyer and sellers so if the Buy volume would be greater than the selling volume then the price will increase where if the Sell Volume is greater than Buying Volume the price will go down.

The price and the volume go together most of the however we may see some scenarios where the price and volume are anticipating each other. This anticipation leads to diversion or trend reversal. The simple logic behind anticipation of the Volume and Price is losing interest. Let me make it even more clear with the recent example where the price of ETH was going up however the Volume was Anticipating. Here wee can see Bearish Volume diversion in ETH as well as BTC after some time the price dropped from 4k Level.

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6. Is it better to use the volume indicator alone or use it in parallel with another indicator when trading? Justify your answer

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Well, it totally depends upon individual trading style some people like to trade on a n aked chart using some basic tools like Fib Retracement, Trendlines, Patterns, Volume however there are people who trade purely based upon indicators. I think the Volume indicator becomes very powerful if we can combine it with other indicators like RSI, MACD, Moving Averages etc also it is equally useful for the price action trader to find out the power of any breakout by seeing the volume on the breakout candle.

Let's combine Vol indicator with the MACD. As we can see in the char the Vol indicator has already shown interest of buying Vol with Big Green Bar after some time MACD signal line crossover happens and it gave buy signal two. In this way, we are getting two confirmations for jumping into the trade.

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7. The volume indicators are multiple, choose one of them to briefly explain its usefulness in crypto trading.

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I would like to share about my favour indicator VWAP that I usually used to trade Stocks. The full of VWAP is Volume Weightage Average. Ths is completely difference from any normal Moving Average or Exponential moving average as it is calculated by Total Price of Traded Qty divided by the Total Trade Volume. I found it's accuracy really good on bigger timeframe specially. Let me tell you how we can implement it on the chart.

Step:1-- Go to Tradingview.com and Open chart of any asset.
Step:2-- Click on Indicator Section
Step:3-- Type Vwap in the Search box you will get the firs option of Inbuilt VWAP.

Here is how it looks like after implementing the Vwap.

It has 3 lines the middle one is the Main Vwap Line and rest Uper band & Lowerband. To be honest I don't use other two bands expect the middle one. If the price substation above the vwap then it has potential to go even more up vice versa. Also you can see on the chart whenever the price is breaking VWAP wee can take entry and can easily target 1:1. Here is the formula to calculate Vwap-

VWAP= Total dollar value of trading /The volume of trades during that period

The accuracy of vwap is pretty decent however this gives false many false signals in range bound market.

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Conclusion

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The volume indicator is very powerful too and it helps to avoid false signals also improves our accuracy. I believe if the body is the price then Volume is like would of mind and it helps us to know the strength of the trend. We can implement volume indicator with other indicators like MACD, Stochastic RSI, Super trend to get better accuracy. The session was really good and I learned in-depth about Volume.