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.

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RELATED FAQS
  1. Why is the Uptick Volume important for traders and analysts?

    Find out why technical analysts and traders keep track of uptick volume to better assess the momentum of a stock's price ... Read Answer >>
  2. Why is trading volume important to investors?

    Learn about trading volume, its importance and how investors analyze volume to confirm a trend or reversal in a security. Read Answer >>
  3. What is the Uptick Volume formula and how is it calculated?

    Learn more about uptick volume, a measurement of the number of trades that take place during a time when an asset's price ... Read Answer >>
  4. What are the best technical indicators to complement the Uptick Volume?

    See how uptick volume can be used to help confirm price trends from nearly every trend-following indicator, especially when ... Read Answer >>
  5. Why is the Time Segmented Volume (TSV) important for traders and analysts?

    Find out why the Time Segmented Volume (TSV) indicator is considered unique among other types of volume oscillators used ... Read Answer >>
  6. What are the main differences and similarities between Money Flow Index & On Balance ...

    Understand the basics of On Balance Volume and the Money Flow Index, including their similarities and differences in terms ... Read Answer >>
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