What volume measures

Under most charts there is a row of vertical bars, one per candle. That is volume: the number of shares, contracts or coins that changed hands during that candle's period. Price tells you where the fight went. Volume tells you how many people showed up to fight. Together they tell you whether a move was a crowd or a handful of traders.

The number itself

Volume for a period is a count. If a stock's five-minute candle shows volume of 120,000, then 120,000 shares were bought and 120,000 shares were sold during those five minutes. Every trade has both a buyer and a seller, so volume does not tell you which side was "more." It tells you how much activity there was.

 price
        |
      +---+
      |   |       |
    +---+ |     +---+
    |   | +---+ |   |
  +---+ |   | +---+
  |   |     +---+
 volume
  ##   ##   ####  ######  ###
  ##   ##   ####  ######  ###
  ##   ##   ####  ######  ###
       ##   ####  ######
            ####  ######
                  ######

The fourth candle here happened on much more volume than the others. Whatever the price did in that candle, it was done by more participants, or by bigger ones.

Volume is relative

Like body size, a volume number means nothing on its own. 120,000 shares is enormous for a thinly traded small company and nothing for a major index fund. What matters is the current bar compared to recent bars. Most platforms overlay a moving average on the volume panel for this reason. A bar at two or three times the average is a high-volume bar. A bar at half the average is quiet.

Time of day matters too, for intraday charts. Stock volume is heaviest in the first and last half hour of the session and lightest around lunch. A "high" bar at noon may be a normal bar at 9:35. Compare against the same time of day when you can.

What high volume means

High volume means many participants agreed to trade at those prices. That has two readings depending on what price did:

• Big price move on high volume: the move had broad participation. Many traders committed. That tends to be durable, because a crowd is harder to reverse than a few traders.
• Small price move on high volume: a lot of trading happened but price barely moved. That means buyers and sellers were roughly matched at that price. Something absorbed the pressure. This is often what a top or bottom looks like: one side is exhausting itself against a wall of orders on the other side.

What low volume means

Low volume means few participants. Again two readings:

• Big price move on low volume: the move happened in a thin market. Not many traders were involved, so it can reverse easily when the crowd comes back. Beginners see a big candle and assume strength; the volume panel says otherwise.
• Small price move on low volume: nothing happening. Rest. Often what a pullback looks like inside a healthy trend: the crowd that drove the trend is sitting on its hands, not selling.

Key idea: Volume is participation. A price move on high volume was made by a crowd and tends to last. A price move on low volume was made by a few and can reverse easily. Judge volume against recent bars and the same time of day, never as a raw number.

A worked table

Five daily candles for a stock with average daily volume of 1.0 million:

Day 2 and day 4 are what a healthy trend looks like: up moves with the crowd behind them. Day 3 is what a healthy pullback looks like: price gives back a little while the crowd rests. Day 5 is a warning: the biggest volume of the week produced almost no gain. Someone sold every share the buyers wanted at 33. That does not guarantee a top, but it means the easy part of the move is probably over.

Volume and candle shape together

A long wick on high volume is more meaningful than a long wick on low volume. The high-volume version means many traders were rejected at that price, so the trapped group is large. A doji on high volume is a genuine standoff; a doji on low volume is just an empty afternoon.

This is the first of many places where combining two things you already know produces more than either alone. Candle shape says what happened. Volume says how many people it happened to.

Try it: On a daily chart with the volume panel visible, find the three highest-volume bars of the last three months. For each, note what price did that day and what it did over the following week. Was the high-volume day the start of a move, the middle of one, or the end?

Recap

• Volume counts how much traded per candle. It measures participation, not direction.
• Judge it relative to recent bars and, intraday, to the same time of day.
• Big move on high volume tends to last; big move on low volume can reverse easily.
• High volume with little price progress means one side is being absorbed, which often marks turning points.
• Combine volume with candle shape: a rejection wick on high volume traps far more traders than one on low volume.