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Volume measures how much of a given asset trades in a given period. The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.

For example, a rising market should see rising volume because buyers need increasing numbers and enthusiasm to keep pushing prices higher. When prices fluctuate on little volume, it’s not a strong signal. But when a rise or drop occurs on large volume, it shows something in the stock has fundamentally changed.

Exhaustion moves occur in a rising or falling market. These are sharp changes in price combined with sharp changes in volume, and they signal the potential end of a trend. They happen when the market reaches its top, and traders who are afraid to miss out start to pile in. This exhausts the number of buyers.

Volume can also reveal bullish signs. For example, say volume increases as a stock’s price declines, then moves higher, and then lower again. If the price on the second low stays higher than the previous low, and volume is diminished on the second decline, this is usually a bullish sign.

After a long price move higher or lower, if the price range shows little movement, but there’s heavy volume, it often means a reversal is coming. A rise in volume on a breakout from a chart pattern indicates strength in the move. If there’s low volume, it means the breakout is probably false.

Volume history should be considered using only recent figures. Comparing today’s volume to what happened 50 years ago yields irrelevant data.

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