Docker Compose: Volume declared as external, but could not be found

Question

Running the external volume sample yml from docker-compose v3 docs gives me the following error:

ERROR: Volume data declared as external, but could not be found. Please create the volume manually using `docker volume create --name=data` and try again.

This is the yml code:

version: '2'

services:
  db:
    image: postgres
    volumes:
      - data:/var/lib/postgresql/data

volumes:
  data:
    external: true

I`m running it on windows 10. Also tried to set the version to '3' but got the same error.