Volume · Indicator
Volume counts how many shares or contracts changed hands in each bar, showing how much participation is behind a price move.
Overview
Volume is the simplest measure of market activity: the total number of shares, contracts or coins traded during the period covered by a bar. It is plotted as a histogram beneath the price chart, with each column coloured to show whether the bar closed above or below its open. Because it counts transactions rather than prices, volume answers a different question from every price-based indicator: not where the market went, but how many participants took part in getting it there.
The conventional reading is that volume confirms price. A move to new highs on heavy volume shows broad participation, while the same move on unusually thin volume shows that only a few participants were willing to transact at those levels. Divergence between price direction and volume can foreshadow reversals: when a trend continues to make progress but each successive leg trades on less volume, the pool of buyers or sellers pushing it along is shrinking.
The chart also draws a moving average across the volume columns. That average gives you a baseline for what counts as normal for the instrument and timeframe you are looking at, so a spike is judged relative to recent behaviour rather than an arbitrary number. Institutional participants pay close attention to volume because large orders cannot be filled without it, which is part of why volume clusters around news, earnings and index rebalancing.
How it is calculated
No smoothing or transformation is applied to the raw figure: each column is simply the exchange-reported traded quantity for that bar. What the value represents depends on the market, so a share count on equities, a contract count on futures, and a base-asset quantity on most crypto venues.
The overlaid average is a simple moving average of the volume column itself, so it lags by roughly half its length and needs that many bars before it can print a first value.
Volume = total quantity traded during the bar Volume MA(n) = (V[i] + V[i-1] + ... + V[i-n+1]) / n
Inputs
How to read it
Read each column against the average rather than in isolation. A column two or three times the average marks a bar where an unusual number of participants agreed to transact, which usually coincides with news, an earnings release, an index event or a break of a level many people were watching. A run of columns well below the average marks a market that has gone quiet, which often precedes rather than follows a large move.
Colour adds context about who was in control. A very heavy up-coloured bar closing near its high suggests buyers absorbed all available supply; a very heavy down-coloured bar closing near its low suggests the opposite. A heavy bar that closes in the middle of its range is more ambiguous and often marks a fight rather than a decision, which is why traders read volume alongside the shape of the candle rather than on its own.
Volume behaves differently on different timeframes. Intraday volume follows a strong daily pattern in most equity markets, heavy at the open and close and thin in the middle of the session, so an intraday spike at 15:55 means something different from the same spike at 12:30. Daily and weekly volume are cleaner for comparing one period against another.
Signals to look for
A breakout from a range or a base that occurs on volume clearly above the average is treated as more credible than the same breakout on average volume, because it shows the move attracted participation rather than drifting on a thin book.
A contraction in volume to well below the average while price consolidates in a tight range is watched as a sign that supply has been exhausted. Traders often mark the range and wait for an expansion bar to show which way the market resolves.
An extreme spike after an extended trend, often several times the average, can mark capitulation or a buying climax where the last participants transact at the worst prices. It is only meaningful in the context of an already-extended move.
Successive higher highs accompanied by successively lower volume peaks suggests a trend that is running on fewer participants. This describes weakening participation rather than timing a top, and trends can continue on falling volume for a long time.
Limitations
Frequently asked questions
Volume counts how many shares or contracts changed hands in each bar, showing how much participation is behind a price move.
Read each column against the average rather than in isolation. A column two or three times the average marks a bar where an unusual number of participants agreed to transact, which usually coincides with news, an earnings release, an index event or a break of a level many people were watching. A run of columns well below the average marks a market that has gone quiet, which often precedes rather than follows a large move.
Volume confirmation: A breakout from a range or a base that occurs on volume clearly above the average is treated as more credible than the same breakout on average volume, because it shows the move attracted participation rather than drifting on a thin book.
Reported volume is venue-dependent. Equities trade across many exchanges and dark pools, and a chart may only reflect a subset, so absolute figures are not comparable between data providers or between markets.
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