Volume Analysis

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Uptick

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

    An investor who believes that a particular security or market ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Reversal

    A change in the direction of a price trend. On a price chart, ...
  5. Breakout

    A price movement through an identified level of support or resistance, ...
  6. Bull

    An investor who thinks the market, a specific security or an ...
Related Articles
  1. Confirming Price Movements With Volume ...
    Active Trading Fundamentals

    Confirming Price Movements With Volume ...

  2. Using Volume Rate Of Change To Confirm ...
    Active Trading Fundamentals

    Using Volume Rate Of Change To Confirm ...

  3. On-Balance Volume: The Way To Smart ...
    Technical Indicators

    On-Balance Volume: The Way To Smart ...

  4. How To Use Volume To Improve Your Trading
    Options & Futures

    How To Use Volume To Improve Your Trading

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center