What it is
Volume counts shares or contracts traded in a period. It is the most direct measure of whether market participants engaged with a price move.
How traders use it
- To confirm breakouts
- To judge whether a level was defended
- To identify the most active hours of the session
Worked example
A range high breaks on triple the average volume for that time of day. That expansion is the confirmation a breakout trader requires.
Limitations
- Directionless on its own
- Distorted around the open, close and index rebalances
Common mistakes
- Trading breakouts without checking volume
- Comparing raw volume across different instruments
Educational content only. TradeCaster does not provide financial advice and past results never imply future performance.