Volume is one of the most fundamental and powerful indicators in trading. It measures the number of shares, contracts, or lots traded in a security or market during a specific period. While price tells you "what" is happening, volume reveals the strength behind the move.
In this blog post, we’ll explore what volume is, why it's important, and how traders use it to make smarter decisions.
In simple terms, volume represents the total quantity of an asset that is traded over a given timeframe — for example, within a day, hour, or minute.
Volume is often displayed as vertical bars at the bottom of a price chart, with each bar representing the volume during that time period.
If price moves are accompanied by declining volume, it could be a warning that the trend is losing strength.
Volume spikes can signal exhaustion of a trend and potential reversals:
Breakouts from key support or resistance levels are more reliable when accompanied by higher volume, suggesting that the move has strong backing.
Volume analysis can enhance the accuracy of trading signals and provide deeper market insights.
Always combine volume analysis with price action and other technical indicators for a more comprehensive approach.
Volume is a critical but sometimes overlooked aspect of trading analysis. By learning how to read volume alongside price movements, traders can gain valuable insight into market sentiment and improve their trading strategies.
Integrating volume analysis with your existing tools can give you a stronger foundation for making informed trading decisions.
We specialize in creating custom TradingView indicators using Pine Script, including advanced volume tools and alert systems.
Contact us today to build your personalized volume-based trading solutions!