Volume (VOL): How to Read It
Volume shows how many shares, contracts or coins traded during each period. It reveals the level of participation behind a price move and helps judge whether a move has conviction.
The formula
Common settings: Raw volume bars with a 20-period volume average
How to read it
- Rising price on rising volume suggests strong participation.
- Rising price on falling volume suggests weaker conviction.
- Volume spikes often mark breakouts, news or capitulation.
- Low volume periods often accompany consolidation.
- Compare volume with its own average rather than with other assets.
Typical signals
- Breakout on volume well above average as confirmation.
- Climactic volume spike after a long decline as possible exhaustion.
- Shrinking volume during a pullback as a healthy trend sign.
Pitfalls to avoid
- Volume data can differ between exchanges, especially in crypto and forex.
- High volume does not reveal whether buyers or sellers initiated trades.
- Holiday and half-day sessions distort comparisons.
Strategies that use it
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Why does volume matter?
It shows how many participants support a move, which helps judge its strength.
What is relative volume?
It compares current volume with its average, highlighting unusual activity.
Does forex have volume?
Spot forex has no central exchange, so platforms show tick volume, a rough proxy.
Works well with
On-Balance Volume
On-Balance Volume keeps a running total that adds volume on up days and subtracts it on down days. It helps show whether volume is flowing into or out of an asset.
⚓Volume Weighted Average Price
VWAP is the average price of the session weighted by how much volume traded at each price. Intraday traders use it as a fair-value reference and a key support or resistance line.
💧Money Flow Index
The Money Flow Index is like an RSI that also includes volume. It measures buying and selling pressure on a 0 to 100 scale, helping spot stretched conditions backed by volume.