Volume Analysis


DEFINITION of 'Volume Analysis'

The examination of the number of shares or contracts of a security that have been traded in a given time period. Volume analysis is used by technical analysts as one of many factors that inform their trading decisions. By analyzing trends in volume in conjunction with price movements, investors can determine the significance of changes in a security's price. Volume typically increases as price increases and vice versa; when the opposite occurs, it's called divergence.

BREAKING DOWN 'Volume Analysis'

A significant price increase along with a significant volume increase, for example, could be a credible sign of a trend reversal and could incite an investor to buy or sell. On the other hand, a significant price increase with low volume might just be a temporary uptick in an otherwise downward trend. In this case, the investor may not want to act.

  1. Uptick

    A transaction for a financial instrument that occurs at a higher ...
  2. Breakout

    A price movement through an identified level of support or resistance, ...
  3. Reversal

    A change in the direction of a price trend. On a price chart, ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Bull

    An investor who thinks the market, a specific security or an ...
  6. Divergence

    When the price of an asset and an indicator, index or other related ...
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