What is Volume?

What is Volume: A measure of the number of shares, contracts, or other units of a security that are traded during a given period of time. It is frequently shown as a confirming indicator on a price chart that is used in the technical analysis of financial markets. Its primary purpose is to measure the strength and significance of a market price move.

Category: Technical analysis indicator

How is Volume Used: It is often used as a confirming indicator for price moves. For example, if there is a large price move, higher volume would typically lend more significance to the move than lower volume would. Traders and analysts make decisions on trade entries and exits based on many different factors, including price, volume, market sentiment, and studies based upon these factors. Price moves based on high volume may help trigger decisions to enter or exit trade positions. Low-volume price moves are generally considered less significant.

What Does Volume Consist of: It can appear simply as a number representing the magnitude of shares or contracts traded during a given minute, hour, day, week, etc. Often, however, it appears on charts as a type of technical indicator, usually below the price chart. Volume is typically represented in histogram format with vertical bars. The relative height of a bar denotes the relative volume during that time period, while the color of the bar denotes whether the price move during that time period was net bullish (usually green) or net bearish (usually red).

What Does Volume Look Like:

Chart of Volume
Chart of Volume – Source: TheTechnicals.com and TradingView

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