Volume
Definition
Volume is the total number of shares (or contracts) traded during a given time period — it's the primary confirmation tool for all price action, because a price move accompanied by high volume indicates genuine market participation, while the same move on low volume is suspect and prone to reversal.
Example
“The stock broke above resistance at $18.50 but only 200,000 shares traded in that 5-minute candle vs. an average of 1.2 million. I passed on the breakout — volume wasn't there to validate it, and it faded back within 20 minutes.”
Detailed Explanation
Volume represents the activity of real buyers and sellers transacting at a price. When price moves on high volume, it means many market participants agreed that the new price level is fair — there was real conviction behind the move. When price moves on thin volume, it's more likely the result of a few large orders or low-liquidity conditions, and the move lacks the broad participation needed to sustain it. This is why "volume confirms price" is one of the most foundational principles in technical analysis.
The most important way to read volume isn't the absolute number but the relationship between current volume and average volume — relative volume (RVOL). A stock trading 3 million shares when it averages 500,000 has 6x relative volume, which is far more meaningful than an absolute 3 million in a stock that typically trades 10 million. High relative volume signals that something unusual is happening — a catalyst has attracted attention, institutional orders are flowing, or a squeeze is developing. Day traders prioritize high-RVOL stocks precisely because abnormal volume indicates that the move has a real driver behind it.
Volume analysis extends beyond just "high or low." The pattern matters: volume expanding on up moves and contracting on pullbacks in an uptrend confirms healthy trend structure — buyers are active on strength, sellers on weakness. Volume expanding on down moves and contracting on bounces is distribution — sellers are active, buyers are weak. Climactic volume (an extreme spike significantly above average) at an extended high often signals exhaustion — the last buyers rushing in before sellers take control. Reading the volume pattern alongside price action gives you a significantly richer picture of market character than either alone.