Volume is activity, not a verdict
Trading volume is the number of units traded during a period. Turnover expresses traded value under the relevant market convention. Volume can help you understand participation, liquidity and the context around price movement, but it cannot tell you by itself whether a move is bullish or bearish.
How a volume bar is created
Every completed transaction has a buyer and seller. The reported volume counts the transaction according to the market's reporting rules. Therefore, saying “high volume means more buyers than sellers” is misleading: volume tells you how much traded, while price and order-flow context help explain the result.
Why compare volume with its own history?
A volume of 1 million shares may be enormous for one stock and trivial for another. Compare with average volume, typical turnover, float and the security's normal liquidity.
Price + volume examples
A breakout with unusually high participation can provide stronger context than a breakout on exceptionally low activity. But high volume can also accompany distribution, panic, forced selling, news or a large transfer between holders. The same observation has different interpretations depending on price behaviour.
Volume spikes: questions to ask
- What changed in price?
- Was there a corporate announcement or news event?
- Was the move sustained or immediately reversed?
- Is the volume unusual relative to this stock's own history?
- Did liquidity actually improve, or was the market simply volatile?
Common mistakes
- Calling every volume spike accumulation.
- Ignoring splits, bonuses or other corporate actions when comparing historical volume.
- Using volume without considering market capitalisation and free float.
Practical checklist
- Compare with average volume
- Look at turnover and spread
- Identify the price structure
- Check the news/corporate-action context
- Define what would invalidate the interpretation