How to Read Trading Volume: Why It Should Be Paired With Price

Volume and trading value

Volume is the quantity traded during a candle. On a BTCUSDT chart it means how many bitcoins changed hands. Trading value counts the same trades in money and is shown in USDT, or in won on Korean exchanges. For comparing coins with one another, or a coin's distant past with its present, trading value works better: the quantities of a coin worth a few cents and a coin worth tens of thousands of dollars cannot be compared, and even for the same coin, once the price rises tenfold, the quantity bought and sold for the same amount of money shrinks to a tenth. Whether the bars under a chart show one or the other varies from tool to tool, so check that first.

Each exchange has its own volume

The volume on a chart counts only the trades that took place on that exchange and that trading pair. The volume on Binance's BTCUSDT chart includes no bitcoin trades from other exchanges, and no trades in other pairs or in futures on the same exchange either. So even at the same moment the volume bars look different from one exchange to another, and volume in the won markets of Korean exchanges sometimes spikes on different days from global exchanges. Some services show volume combined across several exchanges, but the figure changes depending on which exchanges are included.

Moves with volume behind them, and moves without

If a candle with a large price move also carried heavy volume, many participants really did buy and sell at that price level. If instead price jumped sharply on light volume, the order book may have been so thin that just a few orders could push the price. Long wicks that appear out of nowhere during quiet hours or on low-volume coins are cases like this. That is why a widely used reading gives more weight to a move backed by volume than to a move of the same size without it. Carrying weight, however, is no guarantee that the move will continue in that direction.

Volume on breakouts

When volume rises well above normal on the candle that crosses a resistance zone that had capped price several times, it means a lot of new trading took place at that level, so it is used as one piece of evidence that confirms the breakout. Textbooks advise more suspicion toward a breakout that barely clears the level without volume, but it is not unusual for breakouts that do have volume behind them to fall back into the range as well. Volume shows the 'weight' of a breakout; it does not decide the outcome. How breakouts are defined and how people try to filter out false breakouts is covered separately in the breakouts and false breakouts article in Part 2.

Climax volume and shrinking volume

When volume several times the usual bursts out all at once on a candle at the end of a long trend, it is called climax volume. It is read as the trace of late buyers piling in, or of stop-losses and liquidations pouring out at once, and textbooks often show the trend stalling afterward as an example. When price keeps rising while volume keeps falling, that is also read as participation fading. Keep in mind, though, that volume counted in coins shrinks as price rises even when the same amount of money is traded, so in such cases it is more accurate to check again with trading value.

How to measure a volume spike

Saying volume is 'high' only means something once you settle what you are comparing it with. A common method is the multiple you get by dividing the volume of the candle that just closed by the average volume of the 20 candles before it. The Volume Spike Scanner on this site calculates it this way and tags 2x or more as Elevated, 3x or more as Spike and 5x or more as Extreme, and it leaves the candle still in progress, whose volume has not filled in yet, out of the multiple. In crypto markets, normal volume varies with the time of day and the day of the week, so on short candles even an ordinary candle that follows a quiet stretch can show a high multiple.

• Multiple = closed candle's volume ÷ average of the previous 20 candles
• Example: average 100, this candle 350 → 3.5x
• Also check whether volume rose across the whole market

Cumulative volume indicators such as OBV

OBV (on-balance volume) is a running line that adds a candle's volume when its close is higher than the previous candle's, subtracts it when the close is lower, and leaves it unchanged when the close is the same. Its value depends on where you started adding, so you look at the direction of the line rather than the number itself. When price stays flat but OBV rises, some read it as a sign that more trading gathered on the up candles. A volume profile, on the other hand, collects volume by price level rather than by time; you can view it with the Volume Profile Chart tool, and it is covered separately in the volume profile and VWAP article in Part 3.

Inflated volume: wash trading

Volume counts real trades, but there is no guarantee that every one of those trades was between different people. When one person or one group buys from and sells to itself to manufacture volume, it is called wash trading. It is used to lift an exchange's ranking or to make a coin look actively traded, and the smaller the exchange and the more thinly traded the coin, the more room there is for suspicion. On trading pairs with zero fees, buying and selling over and over costs almost nothing, so volume can balloon. Large volume alone is not enough to conclude that real interest is large.

Common misconception: volume tells you the direction

The phrase 'there was a lot of buying volume' is not accurate. A trade only happens when a buyer meets a seller, so the quantity bought is always equal to the quantity sold. What you can tell apart is which side instantly filled against orders resting in the order book, in other words whether the market order that came in was a buy or a sell. Binance reports separately, for each candle, the amount filled by market buys, and the taker buy share in the Volume Spike Scanner is that amount divided by total volume. This share, too, only shows which side was in more of a hurry; it does not tell you the next direction. Volume is a tool for measuring the size of a move and how many took part in it; direction is still something price tells you.