LEARN VELOCITY INDICATOR INDEX IN 3 MINUTES —— BLOCKCHAIN 101

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Today’s topic feels like a movie — Fast & Furious. Yes, the one everyone likes. The name of today’s topic is “VELOCITY INDICATOR INDEX.” The Velocity Indicator measures how fast price is changing over a given period. If moving averages tell you direction and RSI tells you momentum, Velocity tells you the “speed” of price movement.

Think of it as:

Price trend = car moving forward
Velocity = how fast the car is accelerating

So even if price is going up, a declining velocity means the trend is losing energy.

You might ask: what is speed useful for? Shouldn’t we focus on the price trend?

The reason is simple: even if you understand the price trend, it doesn’t mean you understand the strength of the trend, because the real language of a trend is speed.

In the crypto market, you have definitely experienced this extremely typical moment: the price looks like it’s steadily trending upward, the candles close green day after day, and you’ve even silently calculated your target price in your head. But suddenly, one bearish candle wipes out several days of profit, and it even reverses the entire trend, leaving you feeling completely blocked and frustrated.

Here comes the question—

Why did you get the direction right, yet still lose money?
Why is the trend clearly still there, but the market “runs out of breath” in advance?
Why does the breakout look beautiful, yet has zero follow-through?

This is the key that most traders ignore for a long time: a trend does not only have direction, it also has “speed.” And the Velocity Indicator was born to solve exactly this.

What is the Velocity Indicator? What problem does it actually solve?

Back to the topic itself: what is the Velocity Indicator? It sounds highly technical, but its essence is actually very intuitive: it measures the speed of price change, not where the price has reached.

If we compare “trend direction” to the driving direction of a car — then “Velocity” is the car’s acceleration.

The direction is right, but speed is decaying, which means the car could stop at any time;
The direction is right, and speed is increasing, only then does the trend have real follow-through.

More importantly: speed often comes before price changes. This means Velocity can give you an earlier trend reversal signal than price itself.

A simple formula can explain its principle: Velocity = Current Price − Price N Periods Ago

The faster the price changes, the larger this value becomes;
The slower the price changes, the value begins to decrease;
When the price starts reversing, the value will cross 0.

No complex math, no heavy calculation — just “speed.”

Why is the Velocity Indicator especially valuable in the crypto market?

The crypto market is more emotional and faster-paced than stocks or commodities. Trend continuation often does not last as long as in traditional finance, and fake breakouts, fake rebounds, and fake trends are everywhere.

The value of Velocity in crypto is mainly reflected in three layers:

1. It lets you see “in advance” whether a trend is accelerating or weakening

A common scenario: the candles keep moving up, but Velocity is not rising with them — what does that mean? It doesn’t mean the trend is already weak, it means: the trend is losing momentum, and most people still can’t see it.

Velocity’s pullback often leads price reversals by 3–10 candles. It is a very typical “early red warning light” indicator.

2. It helps you identify “fake breakouts”

The crypto market’s favorite move set: fake breakout — blow up the longs — then reverse-kill downward. But Velocity has an extremely practical feature: a real breakout must be accompanied by increasing speed; a fake breakout usually has low speed, shrinking strength, and short duration.

This means Velocity is a tool specifically designed to expose “bait-and-switch” price action.

3. It helps you judge whether a trend has real “follow-through”

You’ve definitely caught this kind of move too: the trend clearly breaks out, but after two days it’s already exhausted. Why?

Because that was only a “directional change,” not a “speed change.” Whether a trend can run into a big move depends on whether speed keeps increasing. Velocity helps you quickly judge whether the trend’s fuel is sufficient.

Velocity Indicator in practice: How to interpret it?

Velocity’s logic is very simple, but once combined, it can produce powerful insights:

Velocity > 0 = price is accelerating upward. Actively bullish, acceleration phase of an uptrend.
Velocity < 0 = price is accelerating downward. Actively bearish, the speed of the downtrend is strengthening.
Velocity rising ≠ price rising. Velocity represents the “speed trajectory.”

You may see these three situations:

Price is ranging sideways but Velocity rises → the market is storing power
Price is rising but Velocity falls → reversal risk
Price rises and Velocity rises together → this is the healthiest trend

Velocity reverses first, price reverses later (a leading indicator)
This is the most valuable part of Velocity: changes in speed show up earlier than changes in direction. A classic signal: price makes a new high, but Velocity does not make a new high → bearish divergence, trend is weakening; and vice versa.
Extreme Velocity = possible late-stage trend (blow-off signal)
When Velocity suddenly spikes very high, it often isn’t a good thing. Why? Because extreme speed usually means: the market is doing “the last sprint” → and then the trend goes out. It’s like a race car blasting at the finish line — after that, there’s no strength left.

Best combinations: Velocity Indicator with other indicators

Velocity does not require stacking tons of indicators, but it pairs especially well with these tools:

1. Velocity + Moving Averages (MA)

MA: tells you the “direction”
Velocity: tells you the “speed”

Combination logic:

Direction right + speed right → highest-probability trend
Direction right + speed decaying → pseudo-trend, don’t chase

2. Velocity + RSI (Momentum)

RSI: evaluates “force”
Velocity: evaluates “acceleration”

It is very good at capturing:

bearish divergence
bullish divergence
fake breakouts
reversal points after a surge

3. Velocity + Volume

Volume determines whether it is “real price action.” Velocity gives you “speed,” Volume gives you “fuel.” Only when both strengthen can a trend run far.

What kind of traders are most suited to using Velocity?

Velocity is especially suitable for these types:

Those who want to catch trends but always end up buying the top: Velocity tells you whether the trend truly has speed support.
Those who want to predict reversals early: Velocity’s leading nature is perfect for catching tops and bottoms.
Those who want to filter fake breakouts: if speed doesn’t rise, it’s a fake move.
Swing traders and trend traders: Velocity is one of the best reference indicators for “trend continuation.”

Summary: Velocity is the trend weapon you most easily ignore, but most should master

The Velocity Indicator is not a flashy indicator. It is very simple, but it lets you see what others cannot:

whether the trend has speed
whether speed is increasing or decreasing
whether the market is storing power or losing power
whether the breakout is real or fake
whether direction has follow-through
whether a reversal is brewing

It solves the most painful thing for all traders: you didn’t lose because of direction — you lost because your speed judgment was wrong. Direction can be judged, speed must be confirmed, and only then is a trend truly safe.