Volume counts how much was traded during each period on a chart: shares for stocks, contracts for futures, coins or quote currency for crypto. It is usually shown as bars under the price chart, one bar per candlestick. Price tells you what happened; volume tells you how many traders took part, which helps judge whether a move is likely to last.
How to read it
- Compare to the average. Volume is relative. Most traders compare the current bar to a 20-period average volume.
- Volume confirms breakouts. A break of resistance on 1.5–2 times average volume is more credible than one on below-average volume, which is a classic false breakout warning.
- Volume and trend. In a healthy uptrend, volume tends to rise on up days and fall on pullbacks. The reverse pattern can signal weakening.
- Climax volume. An extreme spike after a long move can mark exhaustion, such as capitulation at a bottom.
- Volume-based tools. VWAP weights price by volume to show the average price paid during a session.
In spot forex, only tick volume is available, so treat it as a rough guide.
Example
A stock’s 20-day average volume is 2 million shares. It breaks above resistance at $55 with 4.2 million shares traded, about 2.1 times average, and closes at $55.90. Two weeks later, a second attempt above $58 happens on 1.3 million shares, below average, and closes back at $57.40. The first breakout had strong participation; the second looked like a weak push, and a trader might tighten risk rather than add.
Patterns such as the bull flag and head and shoulders have typical volume behaviour that helps confirm them.
Common mistakes
- Reading raw numbers. 1 million shares is huge for one stock and tiny for another.
- Ignoring time of day. Intraday volume is naturally higher at the open and close.
- Trusting crypto volume blindly. Volume differs by exchange; compare like with like.
- Using volume alone. It confirms price action; it does not replace it.
For more, see the volume analysis guide.
Educational content — not financial advice.
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