What are volume spikes? Learn

What a volume spike is

Volume is how much traded in a period — on crypto futures usually counted in dollars. A volume spike is a candle whose volume is far above the coin's recent average: for example a 5-minute candle with three times the volume of the previous few hours. The comparison is always with the coin itself, because "high volume" on BTC and on a small coin are different numbers.

Why traders watch volume

Price shows where the market went; volume shows how much conviction was behind it. A move on thin volume can be undone by the next order. A move on heavy volume means many participants agreed on the new price — or were forced to trade at it. Unusual volume also often comes first: when a coin suddenly trades several times its normal amount, something is happening even if the price has not moved much yet.

How to read a spike

• Spike with a strong move. Volume confirms the move: buyers or sellers are acting with size. Breakouts on heavy volume fail less often than breakouts on quiet candles.
• Spike without a move. A lot traded but the price barely changed: one side is absorbing the other with limit orders. It often comes before a larger move once the absorbing side is done.
• Spike after a long trend. A huge candle at the end of a long rise or fall can be a climax — the last buyers or sellers rushing in.
• Several spikes in a row. Sustained volume means sustained interest; a single spike that fades at once is often news or one large order.

Limits to keep in mind

Volume shows that unusual money traded, not which side was stronger — every trade has a buyer and a seller. Wash trading and liquidation cascades also inflate volume. Coins with a short history, such as new listings, have an unreliable average, so their spikes are harder to judge. Read volume together with price, open interest and liquidations.