Volume

Description

Volume is the count of all shares, contracts, or units that changed hands during a given candle or period. It is displayed as a histogram of vertical bars below the price chart, with each bar corresponding to the same time period as the price candle above it. Volume is the most direct measure of market participation and is considered one of the few non-derivative indicators — it reflects raw market activity rather than calculations applied to price.

How It Works

Volume is simply counted: every transaction that occurs during a period contributes to that period’s volume. A bullish candle with high volume means many participants were buyers during the period. A bearish candle with high volume means many participants were sellers. Volume bars are often colored to match their candle — green for up-periods, red for down-periods.

How to Read It

High volume on a price advance confirms the move — many participants agree on the direction. High volume on a decline confirms selling pressure. Low volume on a price move suggests few participants are behind it and the move may reverse. Breakouts on high volume are more reliable than breakouts on low volume. Declining volume during an advance — while price still rises — often warns the trend is losing participation.

Common Uses

• Confirming breakouts and trend moves
• Identifying climactic reversals (massive spike in volume at extremes)
• Detecting institutional activity through unusual volume surges
• Volume dry-up on pullbacks as a sign the trend will resume

Caveats

Volume data quality varies significantly. Equity exchange volume is reliable; forex “volume” on most retail platforms is tick volume (number of price changes), not actual traded units — a much noisier proxy. Comparing absolute volume levels across different instruments is meaningless; what matters is volume relative to recent history. Extended low-volume periods can precede both minor consolidations and major directional moves.