Definition
Volume analysis is the practice of interpreting the number of shares or contracts traded over a given period to judge the strength behind a price move. Where price tells you what happened, volume tells you how much conviction was behind it.
A price advance on heavy volume reflects broad participation and is generally treated as more durable than the same advance on thin volume. Volume therefore serves as a second, independent signal that either confirms or casts doubt on what price alone suggests.
Why it matters
How it works
Analysts compare current volume against a recent average to spot unusual activity. A volume spike at a support or resistance level marks a zone where many participants changed their minds. In classic pattern analysis, volume frequently diminishes as a pattern develops and then expands sharply on the breakout, lending weight to the move.
Divergence is a key signal: if price makes a new high while volume shrinks, the rally rests on fewer buyers and may be fragile. Conversely, climactic volume after a long decline can mark capitulation and a possible bottom. Volume is rarely used alone — it works best as confirmation alongside price structure.