Understanding the Volume Dots. A new to way to visualise volume
Volume is one of the most important indicators used by traders. However, interpreting volume often is a challenge and it takes a trained eye to understand how to make sense of volume.
After months of research, we at CryptoControl are happy to introduce a new kind of charts that makes understanding volume easier than ever.
How does it work? What do these dots represent?
The visualisation is quite simple. Each dot represents how much volume there was at that point. The darker the dot, the greater the volume at that point.
This size of a dot represents the price groupings, which can be 50$, 100$ or even 0.1$, depending on the asset being looked at.
It’s that simple!
With the help of these dots, you can easily analyse trading volumes at different price points in a single candlestick all in just one timeframe.
What predictions/conclusions can you make from these dots?
While the idea of these dots is quite new, our traders here at CryptoControl have been trading heavily using these dots and we have discovered two main use-cases.
1. Identifying Support & Resistance lines
Figuring out what should be the right support/resistance level is often a challenge. To find the right support/resistance points, a trader needs to find the key pivot points in a chart and confirm it with enough volume.
However, with the help of the dots, a trader can quickly spot the brightest dot where the most volume has happened and use that to identify the new support/resistance lines. See the diagram above as an example.
2. Understanding Long-Short Squeezes
One of the biggest advantages of the Volume dots, is the way it can easily identify short squeezes.
A short squeeze is a situation in which a heavily shorted asset moves sharply higher, forcing short sellers to close out their short positions, adding to the upward pressure on the asset.
This sort of activity typically starts with a large market buy order which drastically rises the price and forces the shorts to get liquidated or trigger their stop losses.
In the diagram above, you can clearly see a large market order being placed which caused many shorter to trigger their stop loss or get liquidated.
A whole new field of study for chart junkies
The volume dots are a new kind of charts and they haven’t been very easy to create.
However, we here at CryptoControl believe that there are a lot of unexplored use-cases and studies that people can find using these dots and we’d encourage our users to share their findings to us.
For users who’d like to get access to the dots, they can do so by visiting https://cryptocontrol.io/en/volumedots
