Volume measures the number of shares (or contracts) that changed hands in a given period — a day, a week, or an intraday bar. It is the most direct measure of market participation and interest, showing how many buyers and sellers agreed on a price at any given level.
The basic interpretation: volume should expand in the direction of the trend. A rally on high volume is broadly viewed as a sign of genuine demand; the same rally on thin volume suggests it may be fragile, driven by a lack of sellers rather than a surge of buyers. Similarly, a decline accompanied by heavy volume suggests real distribution; a decline on light volume may be a normal pause within an uptrend.
Volume analysis becomes particularly powerful at key price levels. A breakout above resistance accompanied by substantially above-average volume is a stronger signal than a breakout on low volume. Volume analysis is also central to the On-Balance Volume (OBV) indicator, which tracks cumulative volume flow as a proxy for institutional buying and selling pressure.