Volume
The total number of shares, contracts, or lots traded during a given period.
Volume is total trading activity in a period and a core confirmation tool. Moves on high volume carry conviction; low-volume moves are more likely to reverse.
Volume measures total trading activity in an instrument over a specific timeframe. It is one of the most important confirmation tools in technical analysis. High volume behind a price move suggests strong conviction and increases the likelihood that the move will continue. Low volume warns that participation is thin and the price action may reverse. In forex, tick volume (number of price changes) is used as a proxy because the market is decentralised.
How It Works
- Displayed as a histogram below the price chart, each bar showing total trades per period
- Rising volume in an uptrend confirms buying interest; in a downtrend confirms selling pressure
- Volume spikes often occur at turning points: capitulation at bottoms, euphoria at tops
- In forex, tick volume correlates well with actual volume for major pairs
Trading Tips
Never trust a breakout on low volume. Wait for volume confirmation before committing.
Watch for volume divergence. New price highs on declining volume = weakening trend.
Use volume to filter other indicator signals. An RSI divergence confirmed by a volume spike is more reliable.
Volume Example
Say EUR/USD breaks above 1.0900 on triple the average hourly volume and holds. The participation confirms real buying behind the move. The same break on half volume reverses by lunch: no conviction, no follow-through.
How Traders Use Volume
Demand volume behind every breakout you trade. In forex without central volume, read tick volume or futures volume as proxy. Low-volume moves are rumors. High-volume moves are news.
Related Terms
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