In the world of stock trading, price is only half the story. The other half? Volume.
The Volume Indicator is one of the most powerful tools traders use to confirm trends, identify reversals, and understand the strength of a price move. But what exactly is it—and how does it work?
Let’s break it down in simple terms.
Volume refers to the number of shares traded in a specific period of time (like one day, one hour, or even one minute). If 10,000 shares of a stock are bought and sold in a day, the volume for that day is 10,000.
It shows how active a stock is. Higher volume = more interest and liquidity.
The Volume Indicator is a technical analysis tool that displays trading volume as a bar chart under the main price chart.
Green bar: Volume on an up day (price closed higher than it opened)
Red bar: Volume on a down day (price closed lower than it opened)
These bars help traders gauge the strength of a price move.
Volume adds context to price movement. Here's how:
📊 High volume + price up = strong bullish move
📉 High volume + price down = strong bearish move
😐 Low volume + big price move = weak or fakeout move
🔄 Sudden volume spike = potential reversal or breakout
Confirming Trends
A rising price with increasing volume confirms a strong uptrend.
A falling price with rising volume confirms a strong downtrend.
Spotting Reversals
If volume suddenly increases after a long trend, it may signal a reversal is coming.
Identifying Breakouts
Breakouts above resistance or below support levels are more valid with high volume.
Volume Divergence
If price goes up but volume decreases, it might mean the rally is losing strength.
Imagine stock XYZ breaks above a resistance level at ₹100. If this breakout happens on high volume, it signals strong buying interest and the move is likely to continue.
But if the breakout happens on low volume, traders might wait for more confirmation or avoid the trade, suspecting a false breakout.
Volume may seem basic, but it’s one of the most underrated tools in a trader’s toolkit. It doesn’t predict direction on its own, but it validates price action. Whether you're a beginner or a seasoned trader, learning to read volume effectively can greatly improve your trading decisions.
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