What is Volume Analysis in Trading?

Volume analysis examines the number of shares or contracts traded during a specified period. It is used alongside “price data” to assess the level of market activity behind a price movement.

For example, a stock moving above resistance with substantially higher volume than its “recent average” may indicate stronger participation than the same price move occurring on low volume.

Generally, traders examine the volume through:

• Absolute trading volume
• Average volume
• Volume relative to previous sessions
• Volume during breakouts
• Volume during price declines or advances
• Volume-based indicators such as On-Balance Volume (OBV)

How to Use Volume in Stock Market Analysis

Volume is generally interpreted in combination with price movement. Let’s see how:

Note: These relationships are observations rather than guaranteed signals. Corporate announcements, index rebalancing, institutional transactions, derivatives activity, and other events can also cause unusual volume.

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