Technical indicator

Volume

Volume is the number of shares traded in a given period, for example one day. It rarely gives buy or sell signals on its own, but it is one of the most important tools for confirming what the price is doing.

Type

Volume

Typical parameters

none

Main signal

Confirms price moves; spikes mark trend starts and capitulation

How to read volume

• High volume often marks the start of a new trend. A breakout on heavy volume is more trustworthy than one on light volume.
• High volume is common near market bottoms, when the last sellers give up (capitulation).
• Relatively low volume shows indecision – traders are waiting, and price moves on low volume are less reliable.
• Volume spikes usually accompany a sudden drop or jump in price, often on news.
• Trend confirmation: in a healthy uptrend volume rises on up days and falls on down days; the reverse holds for a downtrend.

Volume-based indicators

Several indicators combine volume with price to measure buying and selling pressure: On Balance Volume adds or subtracts each day’s volume depending on the direction of the close, and Accumulation/Distribution weights volume by where the close falls within the day’s range.