Importance of Low Volume Bars

In this review, we will talk about the Bitcoin market, and we will start this overview with the concept of bars with small volumes. Bars with a small volume attract less attention. Usually the public focuses on high-active-bars, which have high and extremely high volume. Such active bars are discussed in the Newspapers because they are usually accompanied by the releases of important news, traders discuss the price-action for bars with high volume. And those bars with small volumes remain unnoticed in analyses and discussions. This is non-professional! I will show an example. What valuable information can carry bars (candles) with low volume?

This chart of BTCUSD (12H timeframe), we have a fresh series of green candles. Note candle number two and candle number four. They both have a low volume.

Let’s talk about candle number 2. What can be said of this little volume? At first glance, it may be a lack of demand, because the green candle number 2 opened near the lows and closed near highs – that is, for 12 hours the price has grown with a low volume. Usually, this is a sign of weak demand. However, the following bar growth accelerated – from this, we can conclude that the low volume on the 2nd green candle is a lack of supply! It’s quite paradoxical and difficult to understand, but we can try to do it if you look at the red candle which I have marked with a red arrow. What action has occurred on this active red candle? Price dropped deep below the level of 7000 dollars per bitcoin. And therefore the high-volume activity likely indicates the activation of stop-loss of traders who hid their protective orders below the ‘safe’ level of 7000 and the 6900 level. That is, the red candle was more manipulative in nature because the goal was to knock traders out of their positions. As a result of this manipulation, we have a low volume on the green candle number 2, because the manipulation is over, and the market naturally goes away from the price that was artificially created.
On bar number 3, we see an acceleration in price growth amid rising volumes. This is a healthy sign. This third candle moves according to the laws of supply and demand, and not according to the laws of manipulation, so candle number three is a typical Demand Bar. Candle number 4 also has a low volume. I say this is a lack of supply (NS). Why am I saying this? Look at the opening, closing, and low prices. The main movement of this candle occurred under the closing level of candle number 3. That is, the auction went into the body of candle number 3 and did not find high activity there. That is, the market was not interested in moving down. This candlestick number four can be considered as testing of supply before breaking out above the resistance level of 7200 dollars for Bitcoin (red line). It was a “preparation bar.” And already on candle number 5, there was a breakout.
Thus, candles number 2-3-4-5, they all add up to one bullish story which tells us that the market is rather strong than weak in this period. The bulls proved their dominance over the level of 7200, and in the case of testing this level (and this is quite possible), we should expect support there.

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