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Volume and What It Confirms

Published by the Drishti team · Reviewed 2026-11-07 · Researched and edited with AI assistance.

Module 2 · Chapter 7 of 10 · ~5 min read · Tax and law facts as of November 2026

Last chapter, you marked support and resistance as zones and planned entry, stop and target before buying. Now a new question: what does trading volume tell you, and should you wait for high volume before buying? Every price and volume below is illustrative, not live.

7.1 What volume counts, and what it does not

Volume is the amount traded in a period, such as one day. If 1,200 Bitcoin (BTC, the largest crypto coin) changed hands today, volume is 1,200 BTC.

Every trade has a buyer and a seller, so volume shows how busy the market was, not who won. Think of a crowded kirana shop on Diwali eve: the queue shows interest, not whether prices will rise.

Charts draw volume as bars under the candles. A tall bar can sit under a green candle or a red one, so volume alone has no direction.

7.2 A breakout on thin volume versus thick volume

A breakout is a close beyond a support or resistance zone. A real one tends to draw a crowd, so traders compare that day's volume with the 20-day average, the mean of the last 20 days.

Say BTC closes at ₹63,40,000, above a ₹63,00,000 ceiling, on 1,200 BTC against a 2,500 BTC average. That is 0.48 of the usual crowd, so the confirmation is weak.

Waiting for volume would have kept you out of this trade. It would also keep you out of thin-volume breakouts that worked, so volume can doubt a move but never predict one.

Every row below uses ratio = breakout-day volume divided by 2,500 BTC, the 20-day average. We call a ratio of 1.00 or more confirmed, a rough guide and not a law.

Move size is not the test: the big ₹1,30,000 move fails this check, while the small ₹25,000 one passes.

7.3 Why exchange volume is not one number

Each exchange counts only its own trades, so one coin shows a different volume on every venue, and some of it is fake.

Wash trading means one party trading with itself to look busy. A 2019 Bitwise report to the US SEC said about 95% of reported Bitcoin volume was fake. A 2023 study in Management Science found most volume on unregulated exchanges was wash trades.

Indian exchanges trade far less than the biggest global venues. An INR pair, a coin quoted in rupees, is traded separately on each exchange, while global Bitcoin trade is mostly in dollar-linked coins.

After 1% TDS began in July 2022, reports said Indian exchange volume fell sharply as traders moved offshore. So compare a bar only with the same venue's own average.

7.4 Volume spikes at the end of a move

Volume often surges near the end of a long move. After a long rally, one giant-volume day can mean the last eager buyers have arrived, which some traders call a buying climax.

Say BTC rallies for ten days to ₹66,00,000, and day 10 trades 6,000 BTC, which is 2.4 times the 2,500 BTC average. Over the next five days price drifts down on 1,500 to 2,000 BTC a day.

The spike showed many people buying, not that buyers had run out. Only the quiet drift afterwards showed the crowd had left, and price had already turned.

7.5 Use volume as a check, never a trigger

Treat volume as a second opinion after price breaks a zone, and ask one question: is today's volume above the 20-day average?

If the ratio is below 1.00, doubt the breakout: wait for another close, or buy less. Above 1.00 you hold slightly more evidence, nothing more. You still set entry, stop and target first.

This chapter is educational only. It is not tax, legal or investment advice. Check current rules with a chartered accountant.

Next: moving averages and RSI, two indicators built from price.

Key takeaways

• Volume counts how much was traded, not which way price will go.
• A breakout on volume above its 20-day average is better confirmed, though thin volume cannot predict failure.
• Reported volume can include wash trades, and each exchange counts only itself.
• A volume spike after a long rally can mark a turn, but only afterwards.
• Use volume as a check after price breaks a zone, never as a trigger.

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Educational & illustrative only — not investment advice. Drishti Pro publishes AI-generated trade ideas and their public track record for information. Crypto is volatile and you can lose money. Nothing here is a recommendation to buy or sell any asset. Do your own research.