Follow-up and example of the fourth principle of Dow Theory

The fourth principle of Dow Theory
is that volume confirms the direction. If the trend is upward, we notice that with every upward movement, the volume is high, and with every downward movement, the volume is low and is considered just a normal correction. However, if the volume increases during the decline, this could be a strong correction signal or the beginning of distribution. Volume represents the trading size within each candle, whether it is buying or selling.

From the image, we notice the Bitcoin chart from the bottom of 15 thousand, and during the upward periods, the green bars indicate that the volume is increasing and high, while during the decline, the volume is decreasing and weak, indicating that the decline was just a correction to continue the upward trend. In the downward trend, the opposite occurs; the decline happens with high volume while the rise occurs with weak volume because it is just a corrective rise to continue the decline.

As for the recent movement of Bitcoin Btc, we notice that the decline came with weak volume, but also the rise was not with strong volume, and this is the first signal of the beginning of weakness in the upward trend. At the bottoms, if the volume is high and the movement is boring, this indicates accumulation, while at the tops, if the volume is high and the movement is aggressive, this indicates distribution. The color of the volume bars, whether green or red, does not matter; what matters is the strength or weakness of the volume.

You cannot make a decision based on volume
Volume is only to confirm your decision and confirm your analysis

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