What Is Volume in Stock Market? Meaning, Types & Uses (2025)

What Is Volume in Stock Market? Real Meaning, Types & How Traders Use It

Volume is one of the most important, powerful and misunderstood concepts in the stock market. Most beginners focus on price — but professional traders focus equally on volume because volume reveals the real activity behind the price. Without volume, price moves are weak. With strong volume, even small price changes become meaningful.

In simple words: Volume tells you how many shares were bought and sold during a certain period. It shows the strength behind price movement and helps traders understand whether the trend is genuine or fake.

What Exactly Is Volume in Stock Market?

Volume represents the total number of shares traded between buyers and sellers. If 1 lakh shares are exchanged in a 5-minute candle, the volume for that period is 1 lakh. Volume does not differentiate between buying and selling — it simply shows the total activity.

High volume means strong participation. Low volume means weak participation. But the interpretation of volume is what actually turns normal traders into smart and profitable traders.

Why Is Volume So Important?

Price can lie — but volume rarely lies. A stock may rise due to hype or manipulation, but if volume is low, the move is usually weak. On the other hand, when price rises with strong volume, the chances of continuation increase drastically.

Volume Helps Traders Understand:

• Strength of a trend
• Buyers vs sellers activity
• Breakout validity
• Reversal signals
• Smart money participation
• Market interest in a stock

How Is Volume Calculated?

Volume is simple: If 200 shares are bought and 200 shares are sold, the volume is counted as 200 — not 400. Because every trade has one buyer and one seller.

Therefore, volume is recorded per transaction, not per share side.

Example:

If 10,000 shares are traded in a 15-minute time interval, the volume = 10,000.

TradingView, Zerodha, Upstox — sab platforms automatically volume calculate karte hain and show it in a vertical bar format below the chart.

Types of Volume That Traders Must Understand

Not all volumes are equal. Market provides different types of volume data that help traders in different phases. Understanding these types helps you make better entries, exits, and avoid fake moves.

1. Total Volume

This is the standard volume shown below charts. It represents the total trades executed in a specific time period.

2. Average Volume

Average volume tells you the typical trading activity of a stock. If today's volume suddenly becomes 3–5 times the average, it means something important is happening.

3. Relative Volume (RVOL)

This is a powerful indicator that compares current volume with historical volume. RVOL > 2 means strong participation and possible strong price movement.

4. Institutional Volume

FIIs, DIIs, mutual funds, and HFT algorithms create heavy volume. Their participation increases the reliability of price movement because institutional money moves the market.

5. Retail Volume

Retail volume is smaller and scattered. It increases noise but rarely changes the overall trend.

Volume and Trend Confirmation

One of the strongest uses of volume is to confirm trends. If the stock is rising but volume is falling, the trend is weak. If both price and volume rise together, the trend is strong.

A simple rule:

Price up + Volume up → Strong bullish trend
Price up + Volume down → Weak trend / possible reversal
Price down + Volume up → Strong selling pressure

How Volume Helps Identify Breakouts

Breakouts without volume are mostly traps. Price may cross resistance but if volume is weak, the move usually fails. On the other hand, breakouts with strong volume show genuine buying interest.

Important Note:

A breakout candle with volume 2× or 3× higher than average is a strong breakout.

This is why professional traders wait for volume confirmation before entering.

Volume Patterns Every Trader Must Understand

Volume moves in patterns, just like price. These patterns help traders predict the future trend. Understanding volume patterns is one of the greatest strengths a trader can build. Below are the most important and reliable volume patterns used by professional traders.

1. Increasing Volume Pattern

When volume rises consistently, it shows increasing participation and interest in the stock. This usually happens before strong trends or trend continuation phases.

Implication:

• Strong buyers or sellers are active
• Breakouts become more reliable
• Price moves become smoother

2. Decreasing Volume Pattern

When a stock is trending but volume keeps falling, the trend becomes weak. Price may continue to rise for some time, but eventually a reversal or consolidation happens.

Implication:

• Buyers losing interest
• Breakout may fail
• Reversal may be near

3. Volume Spikes (Sudden High Volume)

A sudden large-volume candle often indicates an important event — like institutional entry, news impact, or panic selling. Volume spikes are one of the strongest early indicators of smart money activity.

When Volume Spikes Matter:

• At support/resistance levels
• At breakout points
• At reversal points
• At high and low of the day

4. Drying Volume (No Participation)

When volume becomes extremely low, price may move randomly and unpredictably. This phase often leads to a sharp breakout or breakdown later because liquidity is weak.

Implication:

• Market waiting for big move
• Low liquidity → high slippage
• Breakout after drying volume is usually strong

Volume and Breakout Psychology

Understanding breakout psychology is one of the most valuable skills for a trader. Price can cross resistance, but unless volume supports it, the breakout will fail. Volume shows whether the crowd and smart money agree with the price movement.

1. Breakout with High Volume

This is the strongest and most reliable breakout type. Price not only breaks resistance but also shows heavy participation — meaning institutions support the move.

Characteristics:

• Volume is 2–5× the average
• Price candle is long and strong
• Continuation is likely

2. Breakout with Low Volume (Fake Breakout)

Low-volume breakouts are usually traps. Price may cross resistance temporarily due to retail excitement, but without strong volume, price quickly reverses.

Signs of Fake Breakout:

• Weak candle body
• Low volume
• Wicks on top of the candle
• No follow-up candle

3. Breakdown with High Volume

When support breaks with high volume, it means panic selling or institutional selling. Such breakdowns often lead to strong continued downside moves.

Volume and Price Action — The Most Powerful Combination

Price action alone is powerful, but when combined with volume, it becomes extremely accurate. Volume confirms which candles are meaningful and which are noise.

1. Bullish Candle + Increasing Volume

This means strong buyers are controlling the market.

2. Bullish Candle + Low Volume

Weak move, risky entry, potential reversal.

3. Bearish Candle + Increasing Volume

Strong sellers are active — downtrend may continue.

4. Sideways Market + Low Volume

Market is waiting for a breakout — traders should wait.

Accumulation and Distribution — Smart Money Volume Analysis

Volume plays a major role in identifying accumulation (smart buying) and distribution (smart selling). Smart money never buys aggressively at once. They accumulate slowly with controlled volume.

1. Accumulation Phase

Price moves sideways, volume increases gradually — smart money buying quietly.

2. Distribution Phase

Price stays high, but volume shows sudden spikes and exhaustion — institutions are exiting.

Volume in Intraday Trading

Intraday traders depend heavily on volume because they require quick entries and exits. Volume tells you whether the stock is active enough to trade.

Best Volume Rules for Intraday:

• Trade only in high-volume stocks
• Avoid trading during low-volume periods
• Check volume behaviour near breakout levels
• High volume + strong candle = safe entry
• Low volume + breakout = avoid

Volume in Swing Trading

Swing traders use volume to confirm longer-term trends. Sustained volume over several days indicates strong institutional interest.

• Rising volume for 3–5 days = bullish buildup
• Dropping volume = trend weakening
• Sharp volume spikes = trend reversal or acceleration

Pros and Cons of Using Volume in Trading

Volume analysis is extremely powerful, but like every trading tool, it also has limitations. Understanding both sides helps traders avoid common mistakes.

✔ Pros of Volume Analysis

• Helps confirm trends with high accuracy
• Identifies real vs fake breakouts
• Shows smart money activity (accumulation/distribution)
• Improves quality of entries and exits
• Reduces risk by avoiding low-volume traps
• Works well with all timeframes
• Combines beautifully with price action

✖ Cons / Limitations of Volume

• Volume varies by stock — no fixed rule fits all
• News-based volume spikes can mislead beginners
• Low volume causes random price movements
• Indicies volume is not as straightforward (like Nifty)
• Volume alone cannot confirm direction — needs price action

Common Myths About Volume That Mislead Traders

Beginners often follow volume blindly without understanding the context. Let’s clear some popular myths.

Myth 1: High Volume Always Means Uptrend

High volume during downtrends can mean panic selling — not bullishness.

Myth 2: Low Volume Means Stock Is Useless

Low volume during consolidation can mean smart money is quietly accumulating.

Myth 3: Breakouts Without High Volume Always Fail

Sometimes volume comes *after* breakout — price leads first, volume follows.

Myth 4: Volume Is Same Across All Stocks

Every stock has its own volume behavior — never compare smallcaps with Nifty50 giants.

How Beginners Should Use Volume (Simple Checklist)

Here is a simple checklist beginners should follow before placing any trade:

• Is today’s volume higher than the average volume?
• Is volume supporting the trend direction?
• Is the breakout coming with strong volume?
• Is the stock liquid enough for intraday?
• Is volume stable or random?
• Are there sudden spikes indicating manipulation?

Practical Ways Traders Use Volume Daily

1. Finding Trend Strength

High volume = strong trend, Low volume = weak trend.

2. Confirming Breakout Validity

Strong breakout requires 2× or 3× volume.

3. Detecting Smart Money Entry

Accumulation phases show gradual volume rise.

4. Avoiding Manipulated Stocks

Low volume + volatile price = dangerous.

Conclusion — Volume Is the Language of the Market

Price shows what is happening — but volume shows why it is happening. No trader becomes consistently profitable without understanding the relationship between price and volume.

Volume reveals the hidden strength of moves, the truth behind breakouts, the intentions of smart money, and the reality behind market trends. Mastering volume can transform a beginner into a confident, informed, and strategic trader.

In short: Volume is the heartbeat of the stock market.

Frequently Asked Questions (FAQ)

1. What is volume in stock market?

Volume means total number of shares traded within a specific period.

2. Does high volume always mean uptrend?

No. High volume can also mean panic selling.

3. How to know if a breakout is real?

If volume is 2–3× higher than average, breakout is reliable.

4. Is volume important for intraday trading?

Yes, high volume ensures smooth entries and exits.

5. What is relative volume (RVOL)?

RVOL compares current volume to historical average volume.

6. Low volume ka matlab kya hota hai?

Low participation, weak trend or manipulation risk.

7. Can volume predict reversals?

Yes, volume patterns can show trend exhaustion.

8. Is high volume good for swing trading?

Yes, sustained high volume shows strong institutional interest.

9. Which stocks have reliable volume?

Nifty50, Bank Nifty components, F&O stocks.

10. Can beginners rely only on volume?

No, volume must be combined with price action.