Volume Analysis

Introduction

Price tells you what is happening. Volume tells you how strongly it is happening. Many beginners ignore volume, but experienced swing traders consider it one of the most important confirmation tools.

What is Volume?

Volume is the total number of shares traded in a day. If 5 lakh shares of a company changed hands today, its volume is 5 lakh. On most charts, volume is shown as bars at the bottom.

Why Volume Matters

Every trade has a buyer and a seller. But when volume is very high, it usually means big players, such as mutual funds, FIIs and large traders, are active. Their buying or selling moves prices strongly and for longer.

The 4 Basic Volume Rules

• Price up + volume up: strong buying. The rise is healthy and may continue.
• Price up + volume down: weak rise. Buyers are losing interest. Be careful.
• Price down + volume up: strong selling. Avoid buying.
• Price down + volume down: weak selling. The fall may be ending soon.

Average Volume

Compare today's volume with the average volume of the last 20 days. If a stock normally trades 3 lakh shares and today it trades 9 lakh, that is 3 times the average. Something important is happening.

Example 1: Breakout with Volume

RST Ltd has resistance at Rs 400. Average daily volume is 2 lakh shares.

• Day 1: closes at Rs 408 with 6 lakh shares traded (3 times average). A strong breakout.
• Swing trader buys at Rs 409 with a stop-loss at Rs 396.
• Over the next week, the stock moves to Rs 432.

Example 2: Fake Breakout

UVW Ltd has resistance at Rs 150. It closes at Rs 152 with volume lower than average. The next day, it falls back to Rs 146. The breakout failed because there was no volume behind it.

Volume at Support

When a stock falls to support and volume spikes on a bullish reversal day, it often means big buyers are defending that level. This is one of the strongest buy signals in swing trading.

Volume Dry-Up

During a pullback in an uptrend, if volume becomes very low, it shows sellers are not aggressive. When the price starts rising again with increasing volume, it is a good swing entry.

Delivery Percentage

On NSE, you can also check delivery percentage, the share of traded volume that was actually taken into demat accounts. A high delivery percentage on an up day suggests genuine buying, not just intraday speculation.

Common Mistakes

• Buying breakouts without checking volume.
• Trading very illiquid stocks where a few trades can move the price.
• Confusing a volume spike from bad news with a buying signal. Always check the direction of the candle.

On GoPocket

Add the volume indicator below your price chart on the GoPocket app. You can also check live market depth to see the buy and sell quantities waiting at different prices, which helps you understand demand and supply before placing an order.

Frequently Asked Questions

What is good volume for swing trading?

Choose stocks that trade at least a few lakh shares daily so you can enter and exit easily.

Does high volume always mean the price will rise?

No. High volume only confirms the strength of the current move, up or down.

Key Takeaways

• Volume confirms price moves.
• Breakouts need above-average volume.
• Volume spikes at support can signal strong buying.

Disclaimer: Hypothetical examples for education only.