How Volume Order Determines a Direction Of A Stock

What is the volume in stocks?

Volume refers to the total number of actual shares exchanged (bought and sold) during a trading day or another predetermined period. It is an indicator of the overall share turnover. Each ticket symbolizes trade and contributes to the overall volume of trading. Even though the same shares may be exchanged back and forth several times, each transaction’s volume is recorded. Therefore, even though the same 500 shares may have been in play numerous times, the volume would be recorded as 2,000 if 500 shares of XYZ were bought, sold, repurchased, and then sold again, resulting in four tickets.

How to Locate Volume on a Chart

The volume traded can be seen visibly on all trading and charting platforms throughout the trading day, typically near the bottom of the price chart. Usually, volume is shown as a vertical bar representing the total volume for the chosen incremental charting period. For instance, volume bars showing the overall trade volume for each 5-minute interval would be seen on a 5-minute price chart. Typically, volume bars are red or green in hue. Net buying volume is represented in green, and net selling volume in red. Some traders favor using a moving average to gauge volume to identify periods of relatively heavy or thin activity.

Volume is Vital

In the trading process, volume (or a lack of it) can be a valuable piece of information. For instance, if you are an active investor who uses charts and trends in your approach, examining volume trends might help you validate patterns. According to technical analysts, the volume should rise to validate any movement, who believe that volume comes before price.

Technical analysts view this as a more long-lasting positive trend than if the exact price increase had taken place on relatively low volume. For instance, if a stock increased from $23 to $25 on high volume relative to the volume trend for that stock over the previous several months. Conversely, technical analysts would perceive a stock’s drop from $25 to $23 on relatively high volume as a more lasting bearish trend (i.e., the stock could continue decreasing over the short run) than if the same price drop had taken place in relatively low volume.


There is a fundamental framework for analyzing volume that traders can follow to use volume to enhance their trading. First, volume can be used by traders to assess the strength or weakness of a move; the higher the volume, the more influential the momentum. The notion is that traders should have a stronger tendency to enter more decisive actions and steer clear of weaker moves or even try to enter in the opposite direction of weak activity.

Price changes on little trading activity may be deemed to “lack conviction” and less indicative of future returns. By comparing the present level to another period (such as the previous days, weeks, or months, depending on your investing time frame), an average, or some other benchmark, you may determine when the volume is high or low. Seasonal variations in absolute volume levels and volume trends should be considered.