Master the power of volume analysis. Learn to read volume bars, identify high-probability setups, and confirm your trades like a pro.
Volume is the total number of shares (or contracts) traded during a specific time period. Each candlestick has a corresponding volume bar showing how many shares changed hands during that time.
● High Volume = Strong Interest ● Normal Volume = Regular Activity ● Low Volume = Weak Interest
What it means: Price breaks resistance + volume explodes = institutions buying
Trading action: Enter long on breakout confirmation. This is your green light.
Example: Stock breaks $50 resistance on 3x average volume → High probability continuation to $52+
What it means: Price hits new high + massive volume = smart money selling to retail
Trading action: Take profits or prepare for reversal. Distribution phase.
Example: Stock hits $55 new high on 5x volume but closes red → Likely top signal
What it means: Price breaks out but volume is weak = fake breakout
Trading action: Wait for volume confirmation or skip the trade.
Example: Stock breaks $50 on 0.5x normal volume → 70% chance of failure
What it means: Price bottoms + huge volume spike = capitulation, sellers exhausted
Trading action: Look for reversal candlestick patterns (hammer, engulfing).
Example: Stock drops to $45 on 4x volume then closes green → Buying opportunity
| Price Action | Volume | Signal | Confidence |
|---|---|---|---|
| Breakout Up ⬆️ | High (2x+ avg) | ✓ STRONG BUY | 90% |
| Breakout Up ⬆️ | Low (<1x avg) | ⚠️ WEAK - Skip | 30% |
| Breakdown ⬇️ | High (2x+ avg) | ✓ STRONG SELL | 85% |
| Breakdown ⬇️ | Low (<1x avg) | ⚠️ WEAK - Wait | 35% |
| Consolidation → | Decreasing | ✓ Good coiling | 70% |
| Rally Up ⬆️ | Decreasing | ⚠️ Divergence - Exit | 75% |
Setup:
Action: Enter on volume confirmation candle. Set stop below breakout level.
Setup:
Action: Enter next candle if it confirms. Stop below spike low.
Stock: AAPL at $180 resistance
Setup: Consolidating for 3 days, volume declining (coiling)
Breakout: Day 4 breaks $180.50 on 45M volume (3x average of 15M)
Entry: $180.75 on confirmation candle
Target: $183 (measured move)
Stop: $179.50 (below breakout)
Result: ✅ Hit $183 in 2 days for +$2.25 profit (+1.25%)
Stock: TSLA at $250 resistance
Setup: Consolidating for 2 days
Breakout: Breaks $250.50 on 20M volume (normal is 35M - only 0.6x)
Action: Skip trade - no volume confirmation
Result: ✅ Smart! Stock faded back to $247 within hours. Saved 1.5% loss.
Look for relative volume vs the first 30 minutes. Morning volume spike = institutional accumulation. Use volume to confirm momentum breakouts.
Focus on daily volume vs 50-day average. Breakouts need 2x+ volume. Watch for volume divergence at tops/bottoms as early reversal warning.
Trade only high liquidity stocks with 1M+ average daily volume. Volume spikes indicate order flow and quick profit opportunities.
Massive volume spike (5x-10x normal) at trend extreme. Usually marks a reversal. Example: Panic selling at bottom creates capitulation spike.
Price makes new highs but volume decreases = bearish. Shows weakening momentum and distribution.
Accumulation: Price sideways/down but volume high = smart money buying
Distribution: Price sideways/up but volume high = smart money selling
Today's volume vs average volume at same time of day. RVOL > 2.0 = unusually high interest.
Volume is the fuel that powers price moves. Every professional trader watches volume because it shows where the smart money is positioned. Use these principles with every trade and watch your win rate improve dramatically.