Three questions, three lenses
Every market, from forex to crypto, can be read through three questions. They are independent, and together they describe almost everything you need to know:
- Which way is it moving? — trend.
- How much conviction is behind the move? — volume.
- How fast is it moving? — volatility.
Master these three and you will read more of the market than most participants, who stare at price alone.
Trend: the market’s direction
A trend is a series of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend). In a range, neither pattern holds and price oscillates between two levels.
Trends do not last forever, but they last longer than people think. The most expensive mistake in markets is assuming a trend has ended because it has paused. A pause is not a reversal; it is the market catching its breath.
Volume: the conviction behind the move
Volume is the amount traded at a given price. Rising price on rising volume is a strong trend. Rising price on falling volume is a warning — the move is running out of participants. Falling price on rising volume is distribution: someone large is selling into the strength.
Volume does not predict direction, but it confirms it. A trend without volume is a rumour.
Volatility: the speed of the market
Volatility measures how far price moves in a period. High volatility means wide swings and large candles. Low volatility means tight, compressed price action. Both are tradeable, but they demand different strategies and different position sizes.
The most dangerous moment is not high volatility — it is the transition from low to high. Compressed markets release energy. Traders who size for the calm get hurt in the storm.
A simple daily routine
- Open the chart for your asset.
- Ask: is the last higher high still intact?
- Ask: is today’s volume above or below the recent average?
- Ask: are the candles wider than they were a week ago?
- Write down the answer in one sentence before looking at anything else.
This takes three minutes and it is more useful than most indicators.
“The trend is your friend until the bend at the end.” — Ed Seykota
By tradeX Research. References: John J. Murphy, “Technical Analysis of the Financial Markets”; SEC “Investor Bulletin: Day Trading”.