Volume is the number of shares or contracts traded on an entire stock or market during a given period. For every buyer, there is a seller, and each trade contributes to the total volume count. In other words, when buyers and sellers agree to make a trade at a certain price, it is considered a single trade. If only five trades occur in a day, the volume for the day is five.
Volume is an important indicator in technical analysis as it is used to measure the relative value of a market move. If the markets are experiencing a strong price movement, the strength of that movement depends on the volume for that period. The higher the volume during the price movement, the stronger the movement.
Analysts use bar charts to quickly determine the level of volume. The bars also make it easier to identify volume trends. When the bars are above average, it is a sign of high volume or strength at a particular market price. In this way, analysts use volume as a way to confirm a price movement. Volume is visible below in the lower portion of the chart.
