Trading volume explained: how to read volume on a crypto chart

Trading volume is the amount of a coin that changed hands during each candle, usually shown as bars under the price chart. It tells you how many traders took part in a move: a break of a level on heavy volume has more participation behind it than the same break on light volume, which is why volume is mostly used to judge whether a move is likely to hold.

This guide explains what the volume bars measure, why crypto volume needs more care than volume in other markets, how to compare a candle with its recent average, and how volume behaves in breakouts, fading rallies and sell-offs. It assumes you can read a candle. If not, start with how to read candlestick charts.

What is trading volume on a crypto chart?

Each volume bar sits under one candle and shows how much traded while that candle was open. On a 1-hour chart, one bar is one hour of trading. On a daily chart, one bar is a full day. The bar is usually coloured to match its candle, so a tall green bar is a candle that closed up with a lot of trading in it.

Volume is shown in one of two units. Base volume counts the coin itself, such as 1,500 ETH. Quote volume counts the money side of the pair, such as $4.5 million. Both describe the same trades. Base volume is easier to compare over long periods because it does not grow just because the price rose.

Every trade has a buyer and a seller, so volume does not show "more buyers than sellers." It shows how much activity there was. The direction comes from the candle: a big up candle on big volume means buyers were willing to keep paying higher prices while a lot of coins changed hands.

Why does crypto volume differ between exchanges?

A stock mostly trades in a few connected venues. A large coin trades on many separate exchanges at once, and the volume bars on your chart usually show only the exchange the chart is drawn from. The same hour can show very different volume on two venues, and neither number is the whole market.

There is a second problem. Some reported crypto volume is not genuine. Wash trading means the same party buys and sells to itself to make a market look busier than it is, and some venues have been accused of inflating their figures this way. Volume on small, little-known venues, and on thinly traded coins, deserves the most suspicion.

The practical answer is to stop comparing absolute numbers. Pick one reputable, liquid exchange for each coin and compare the coin only with its own recent history on that venue. Whether today's volume is high or low for this coin, on this exchange, on this timeframe, is the question that matters. A figure of 10,000 coins means nothing until you know that the usual figure is 4,000.

What is relative volume?

Relative volume is a candle's volume divided by the average volume of the candles before it. On this site the average is taken over the last 20 candles, not counting the candle you are measuring. A reading of 1.0 is a normal candle. A reading of 2.0 means twice the usual activity. A reading of 0.5 means half.

Relative volume solves the comparison problem, because it measures each candle against the coin's own baseline. It also works the same way on any timeframe. Many traders want to see roughly 1.5 times the average or more on a breakout candle. The site's Donchian breakout uses a looser 1.2 times as its minimum, which lets more trades through and accepts more weak ones.

Measure relative volume on the closed candle. Halfway through a 4-hour candle, its volume bar is only about half built, so a reading taken early will look weak even when the full candle ends up heavy.

How does volume confirm a breakout?

A breakout is a candle closing beyond a support or resistance level. Plenty of breakouts fail: price pokes through, finds no one willing to keep buying, and falls back into the range. Volume is one of the few clues about which kind you are looking at.

The chart above shows the pattern. The first rally climbs toward resistance, but each candle trades less than the one before. When it reaches the level there is not enough buying left to push through, and price drops back. The second attempt is different. The candle that closes above resistance trades about twice the average volume, and price holds above the old level afterwards.

Heavy volume on the break means many traders agreed to pay higher prices at the moment it mattered. That does not guarantee the move continues, but it makes a quick reversal less likely than a break that almost nobody joined. The breakout trading guide covers entries, stops and retests in full.

Volume after the break matters too. A calm retest of the broken level on lighter volume is a healthy sign. A sharp return below the level on heavy volume says sellers have taken over.

What does a rally on fading volume mean?

When price keeps rising but each push higher comes on smaller volume, fewer traders are joining the move. That is the first rally in the chart above. It is a warning, not a sell signal. Trends can drift higher on quiet volume for a long time, especially over weekends or holidays.

Fading volume matters most when price is approaching a level. A thin rally into resistance is more likely to stall there than a rally that is drawing in more traders as it climbs. If you are thinking of buying the breakout, it is a reason to wait for the close and see what volume the break itself brings.

What is a capitulation volume spike?

Capitulation is a burst of forced or panicked selling, often after a long fall. On the chart it looks like one or a few very large red candles with volume several times the average, frequently with a long lower wick as buyers absorb the selling. In crypto these spikes are often driven by liquidations, when leveraged positions are closed automatically. The leverage and liquidation guide explains how that chain reaction works.

A spike can mark the point where most of the sellers who were going to sell have sold. It can also be the first wave of a bigger decline. The volume alone does not tell you which. What helps is what comes next: price holding above the spike's low over the following candles, and volume calming down as it does, is more constructive than a spike followed by more heavy-volume selling. The buying the dip guide covers how to wait for that evidence.

What is volume at price?

The volume bars under a chart show volume over time. A volume profile turns that sideways and shows how much traded at each price over a chosen period, drawn as horizontal bars on the side of the chart. Prices where a lot traded are places the market accepted. Prices where little traded were passed through quickly.

The price with the most volume is the POC (point of control). The band around it that holds 70% of the volume is the value area, with its top called the VAH and its bottom the VAL. These often act as support and resistance. Three setups on this site use them: the value area fade, the value area breakout and the POC reclaim.

Does volume change on weekends and by session?

Crypto trades all day, every day, but activity is not even. Volume is often lower at weekends and during the quieter hours between the big regional trading sessions, and it often picks up when Asian, European and US markets open.

This affects relative volume on short timeframes. A Saturday afternoon 1-hour candle at 0.6 times the 20-candle average may be perfectly normal for that time of week, and a Monday morning candle at 1.5 times may be ordinary for the start of the week. On 1-hour and shorter charts, compare a candle with the same hours on previous days as well as with the last 20 candles.

What is the difference between spot and derivatives volume?

Spot volume is coins bought and sold outright. Derivatives volume comes from futures and perpetual contracts, where traders bet on the price, often with leverage, without holding the coin. For large coins, derivatives volume is often much larger than spot volume.

The two can tell different stories. A rally on rising spot volume suggests people are buying the coin itself. A rally driven mostly by derivatives can be leveraged positioning that unwinds quickly. When you compare relative volume, keep to one kind on one venue and do not mix spot and futures figures.

Common mistakes

• Comparing volume across coins or exchanges. Absolute numbers depend on the venue and the coin. Compare a coin only with its own recent history on one reputable exchange.
• Reading an unfinished candle. A volume bar grows until the candle closes, so a mid-candle reading understates it. Judge the closed candle.
• Treating high volume as bullish. Volume measures activity, not direction. A huge red candle on heavy volume is heavy selling.
• Ignoring the time of day and week. Weekend and off-hours volume is often low, so short-timeframe readings need comparing with similar hours.
• Trusting volume on obscure venues. Small exchanges and thin coins are where inflated volume is most likely, and the numbers may not reflect real trading.
• Using volume as the trigger. A volume spike in the middle of nowhere gives no level for a stop or a target. Use it to judge a move at a level, not as the reason to trade.

What to check

1. Which venue and which market is this volume from? Make sure you are reading spot or futures volume from one reputable exchange, and keep using the same one.
2. What is the relative volume? Divide the closed candle's volume by the average of the previous 20 candles. Around 1.0 is normal. A breakout on 1.5 times or more has clearer participation.
3. Is price at a level? Volume tells you most at support, resistance, the POC or the value area edges. Heavy volume mid-range is harder to read.
4. Was volume fading into the level? A rally that thinned out on the way up is more likely to stall. Wait for the breakout candle and see what it brings.
5. Is this a quiet time of week? On short timeframes, compare with the same hours on earlier days before calling a candle unusually high or low.
6. What happened after the spike? After a capitulation candle or a breakout, watch whether price holds the key level over the next few candles.
7. Did you test the rule on this coin? Run any volume filter, with fees of 0.1% each way, on the coin's own history first. None of these rules is known to make money.

Further reading

• Volume (finance) Wikipedia
• Wash trade Wikipedia
• Market profile (volume at price) Wikipedia