Volume
The number of shares (or contracts) traded during a given period — used to judge whether a price move has real participation behind it or is likely to fade.
What the numbers mean
Volume itself has no setting — it is a count of shares traded per bar. What is usually configurable is the moving average drawn over it, commonly 20 periods, which gives the 'normal' level today's bar is being compared against.
- 20-period average — the usual overlay; today's bar is read against it
- 2× average — a common threshold for “heavy” volume
- Below half average — a session thin enough that its price move means little
- 3-month or 52-week — the windows quote pages use for their “average volume” figure
How it is used
Used as the confirmation layer under everything else: breakouts on volume well above the average are taken more seriously, and rallies on shrinking volume are treated as suspect.
- Breakout on volume well above average → taken seriously
- Rally on shrinking volume → treated as suspect
- A reversal candle on the heaviest volume in weeks → the strongest version of that signal
- Volume spike with almost no price movement → buyers and sellers fighting at a level
How it relates to everything else
Volume is the confirmation layer under every other tool on the chart. A moving-average crossover, a breakout from a triangle, a hammer at a low — each is considered stronger when volume backs it and weaker when it does not. It is also the input every indicator in this section is built from.
- Breakout + volume surge → the single most-used confirmation in technical analysis
- Pattern + weak volume → the most common reason patterns fail
- Spikes at index rebalancing, earnings and options expiry mean nothing about conviction
- Only comparable within the same security, never across names
What to watch for
Volume spikes around index rebalancing, earnings, options expiry and the opening and closing auctions for reasons that have nothing to do with conviction. Comparisons only hold within the same security.