Volume
The number of shares traded in a given period — confirming whether a price move has real conviction behind it.
Volume represents the total number of shares (or contracts) exchanged during a defined period and serves as the primary measure of market participation and conviction. In technical analysis, volume acts as a confirming or diverging signal relative to price action. A price advance on expanding volume indicates broad participation and suggests the move is sustainable. A price advance on declining volume — often called a 'low-volume rally' — suggests weakening conviction and potential distribution by large holders. Volume is best interpreted in relative terms against its recent average, typically a 20-day moving average of daily volume, rather than as an absolute figure.
Raw volume numbers are meaningless without context. Always compare the current bar's volume to the 20-day average daily volume. A breakout on 2× average volume is notable. On 5× average? Pay serious attention.
When a stock breaks above a key resistance level, check the volume. A breakout on above-average volume suggests real conviction from institutional participants. A breakout on light volume often fails and returns back into the range within days.
If price is making new highs but volume is declining on each successive rally, that's a bearish divergence — the move is losing participation. If price is falling but volume is also shrinking, sellers are losing conviction and a reversal may be close.
Extreme volume spikes — sometimes 10× or more average daily volume — at the end of extended trends often signal exhaustion. These 'volume climax' candles frequently mark intermediate tops or bottoms as the last group of buyers or sellers gets absorbed.
Volume analysis is most useful on liquid, large-cap stocks where institutional participation is dominant. On small-cap or micro-cap names, a single large order can massively distort volume without reflecting broad market sentiment. Volume also says nothing about the direction of conviction — it can be equally high at a top and a bottom. Without price action context, raw volume data is ambiguous. It's a confirming tool, not a standalone signal.