Price tells you where the market went. Volume tells you how much trading it took to get there. A move made on heavy volume has many participants behind it; a move on light volume can be pushed around easily and is more likely to fade.
What volume measures
Volume is the number of contracts, shares or coins traded during a candle. Most platforms show it as bars underneath the price chart, one per candle, often coloured to match the candle.
A catch for forex traders
Futures, stocks and crypto exchanges report real traded volume from a central order book. Spot forex has no central exchange, so there is no true total volume. What your forex broker shows is tick volume: the number of price changes in each candle. Tick volume tends to rise and fall with real activity, so it's a useful rough guide, but it isn't the real thing.
Using volume to confirm moves
- Breakouts: a break through resistance on rising volume is more convincing than one on falling volume.
- Trends: healthy uptrends tend to see higher volume on rallies and lower volume on pullbacks.
- Exhaustion: a huge volume spike after a long move (a climax) can mark the end of that move, as the last buyers or sellers pile in.
- Divergence: price making new highs on shrinking volume suggests fewer traders are willing to keep pushing.
| What you see | What it may mean |
|---|---|
| Price up, volume up | Healthy buying; trend has support |
| Price up, volume down | Rally losing participation; be cautious |
| Price down, volume up | Strong selling pressure |
| Huge spike after a long move | Possible climax and reversal |
| Breakout on low volume | Higher chance of a fakeout |
Volume is relative
Volume naturally rises at session opens and around news, and falls at lunchtime and in the Asian session. Compare a candle's volume with candles at the same time of day, or with a recent average, not with the candle right before it. In Module 7 you'll go further, looking at where volume traded with volume profile and order flow.
Key takeaways
- Volume measures how much trading happened in each candle.
- Spot forex shows tick volume, not true volume; futures such as 6E give real volume for major pairs.
- Moves and breakouts on rising volume are more trustworthy than those on falling volume.
- Judge volume against the same time of day or a recent average, not the previous candle.