What Are Volume Candles?

Introduction

Volume candles are a new type of candle based on transaction volume. They have many similarities to tick candles, however, consistent volume can provide interesting insights.

Formation

Volume candles close after a certain trade volume takes place. This volume can be measured in two ways: “Base” and “Quote”.

Base & Quote Volume

Quote volume is most familiar. It relates to volume measured in the quote currency (the second currency of a trading pair). For example, 1M quote volume candles on BTC/USD will close after 1M USD has been traded.

Base volume candles measure volume in the base currency (the first currency of a trading pair). For example, 1K base volume candles on BTC/USD will close after 1K BTC have been traded.

Formation Example

Cryptick Volume candles include the trade that will exceed the volume limit for each candle. For example, the current open candle is set to close after 10k worth of trades. The volume of this open candle is currently 9k. The next trade has a volume of 2k. This trade will be included and the candle will close with a final volume of 11k, despite the expected volume being 10k.

This is an expected side effect of volume candles, and is part of Cryptick’s commitment to data accuracy. Trades cannot be split between two candles accurately.

Comparison to Time Candles

Volume candles have the same advantages and disadvantages as tick candles when comparing to time candles with the exception of “Better Volume Analysis”.

Volume Analysis

Direct volume analysis cannot be used with volume candles. Instead, indicators that don’t normally factor in volume can be used. Volume drives the creation of these candles, so indicators that normally don’t factor in volume are, in a roundabout way, now considering volume.

Quote Volume Candle Advantages

The argument for quote volume candles lies with their consistency. Since crypto prices are volatile, quote volume candles keep the volume measurement consistent.

Base Volume Candle Advantages

Base volume candles also have merit. The markets for many cryptocurrencies grow over time, so it takes more transaction volume to move said markets now than it did historically. Base volume candles may keep the candle creation more aligned with the amount of volume required for the market to move.

Cryptick's Volume Candles

Cryptick fully supports both base and quote volume candles of any size. Additionally, using the full suite of technical indicators may provide interesting conclusions as these indicators are able to factor volume in ways otherwise not possible.

Conclusion

Volume candles can be a great tool to discover new ways to measure volume. The same advantage of initial adoption is present, which may lead to considerable gains.