Understanding the relationship between trading volume and currency price
Simply put, trading volume is the number of currencies that have been bought and sold in a certain period, and the currency price is its current value in the market. The relationship between the two helps us understand whether the market is strong or weak.
Here we explain simple cases
Price drops + volumes decrease = Accumulation (Positive)
When you see the stock price falling, but the number of buy and sell operations (volumes) is low, it means that the selling happening is likely from small investors who are afraid and sell in small quantities. In contrast, large investors (whom we call "whales") take this opportunity to quietly buy and accumulate the stock in large quantities at a lower price. This is a positive indicator that the stock may rise in the future.
Price drops + volumes increase = Negative
If the price drops and the volumes increase significantly, it means that there is strong and intensive selling coming from large investors or financial institutions. This selling is in large quantities, indicating true weakness in the market or the stock. This is a negative indicator and suggests that the price may continue to fall.
Price rises + volumes decrease = Distribution (Negative)
When the stock price increases, but the volumes are low, this is an indicator that the rise may not be strong or supported by real buying in large quantities.
