Volume

Volume is the number of shares, contracts or coins traded during a period, such as a minute, an hour or a day. Every trade has a buyer and a seller, so one share traded counts as one unit of volume, not two. On most charts, volume appears as bars under the price, one per candle. Volume shows how much participation stands behind a price move, which helps you judge whether that move is meaningful.

Reading volume on a chart#

• Tall volume bars mean many shares changed hands in that period.
• Short volume bars mean little activity.
• Volume bars are often coloured green or red to match the candle above, but the colour shows the price direction, not whether buyers or sellers "won". Every trade still has both.

What volume tells you#

These are tendencies, not rules. Context and the broader trend matter.

Relative volume#

Raw volume numbers mean little on their own: 2 million shares is huge for a small company and tiny for a mega cap. Traders compare current volume with its own average, such as the last 20 days at the same time of day. A reading of 2.0 means twice the usual activity. See Relative Volume.

Volume through the day#

Stock volume follows a familiar pattern: heavy at the open, lighter in the middle of the day and heavy again into the close, when many funds trade. Comparing a morning's volume with a full day's average is misleading; compare with the same time of day. Forex volume peaks when London and New York overlap, and crypto volume rises when US and European traders are active. See Trading Sessions.

Volume in different markets#

• Stocks and ETFs: exchanges report consolidated volume across venues.
• Futures: volume counts contracts traded; also watch Open Interest, the number of contracts still open.
• Forex: there is no central exchange, so "volume" on most forex charts is tick volume, the number of price changes, used as a proxy for activity.
• Crypto: volume is reported per exchange, and some smaller exchanges have historically inflated their numbers. Focus on reputable venues.

Volume based tools#

Several indicators combine price and volume:

• VWAP, the volume weighted average price, used as a benchmark for intraday trading.
• On-Balance Volume (OBV) and the accumulation and distribution line, which track volume flowing in and out.
• Volume Profile, which shows how much traded at each price level rather than each time period.

Volume and liquidity#

Volume is related to Liquidity but not the same. High volume usually goes with tight spreads and deep order books, but a stock can trade heavily during a panic while liquidity at any one price is thin. Use both volume and the spread when judging how easy a market is to trade.

Frequently asked questions#

What is good trading volume for a stock?#

It depends on your position size. Many traders prefer stocks trading at least several hundred thousand to a few million shares a day, so their orders are a tiny fraction of daily volume.

Does high volume mean the price will go up?#

No. High volume means high activity. It can accompany strong rises or strong falls. Read it together with price action.

What does low volume mean?#

Low participation. Moves on low volume are often less reliable and spreads may be wider.

Sources#

• Wikipedia, Volume (finance)