Volume is simply the number of shares traded during a given timeframe (e.g., hour,
day, week, month, etc.). The analysis of volume is a basic yet very important
component of technical analysis. Volume provides clues as to the intensity of a given
price move.
High volume levels are characteristic of market tops when there is a strong
consensus that prices will move higher. High volume levels are also very common at
the beginning of new trends (i.e., when prices break out of a trading range). Also,
just before market bottoms, volume will often increase due to panic-driven selling.
Volume can help determine the strength of an existing trend. A strong up-trend
should have higher volume on the upward legs of the trend, and lower volume on the
downward (corrective) legs. Similarly, strong downtrends usually have higher volume
on the downward legs of the trend and lower volume on the upward (corrective)
legs.