Volume
Type: Volume
Volume is the number of units traded in a given period. It's the most direct measure of market participation and conviction behind a price move. High volume confirms moves; low volume casts doubt on them.
How it Works
Volume is displayed as a histogram at the bottom of most charts — each bar corresponds to the number of trades or contracts executed during that candle's period.
Volume itself doesn't move price. What it tells you is how much conviction sits behind a move. A large price bar on low volume is suspicious. The same move on high volume is far more meaningful.
How to Read It
Compare current volume to average volume for context. A spike to 3x average volume during a breakout is significant. The same breakout on below-average volume deserves scepticism.
Volume typically spikes at major turning points — both tops and bottoms. Climactic volume (an extreme spike followed by price reversal) can signal exhaustion of a move.
Key Signals
• Breakout + high volume: Confirms the breakout is genuine and backed by real participation.
• Breakout + low volume: Warning sign — the move may be a false breakout.
• Volume climax: Extreme volume spike during a prolonged trend — can signal exhaustion and potential reversal.
• Volume divergence: Price rising but volume declining — trend losing conviction, potential reversal ahead.
Limitations
• Volume data quality varies by market. Forex volume is tick volume (number of price changes), not actual traded volume — treat it accordingly.
• Volume alone doesn't confirm direction — you must combine it with price action.
• In some instruments (e.g. thinly traded stocks), volume can be manipulated. In deep, liquid markets (major FX pairs, indices, large-cap stocks) it's far more reliable.
Trader's Tip: Before entering any breakout trade, check the volume. If volume isn't supporting the move, wait. More breakouts fail on thin volume than any other single factor. Volume is the market's lie detector.