Stock Market · Technical Analysis

Volume

Why volume matters

Volume is the number of shares traded in a given period. It measures how many market participants are involved in a price move. Price tells you WHAT happened; volume tells you HOW CONVINCED the market was.

> High-volume moves are more significant and more likely to sustain. Low-volume moves are suspect, easily reversed.

Volume confirms trends

In a healthy uptrend: volume should be higher on up days (buyers are enthusiastic) and lower on down days (pullbacks are half-hearted). This pattern confirms that buyers are the dominant force.

In a healthy downtrend: volume is higher on down days and lower on up days.

When this pattern breaks, e.g., down days start having more volume than up days in an uptrend, it's a warning that the trend is weakening.

Volume on breakouts

A breakout above resistance on HIGH volume = strong signal. The large volume shows that many participants confirmed the move. This breakout is likely to sustain.

A breakout on LOW volume = suspect. Few participants confirmed it. The breakout may fail and price may return below resistance (called a false breakout or fakeout).

High volume breakoutconviction. Low volume breakout = doubt.

Volume spikes

Sudden, unusually high volume (3–5× the average) at key levels often marks turning points. Volume spikes near support can signal capitulation, sellers exhausted, buyers stepping in. Volume spikes near tops can signal distribution, smart money selling to retail buyers.

Declining volume in trends

If a trend continues but volume is steadily declining, it's a warning. The trend is losing participation. Running out of buyers (in uptrend) or sellers (in downtrend). A reversal may be approaching.

Takeaway. High volume = conviction. Low volume = doubt. Volume should expand on trend moves and contract on pullbacks.