Volume: how many voted
Reading Charts

Volume: how many voted

7 cards and 4 quick questions. About 2 min.

The lesson in full

  1. Volume is how many shares or contracts changed hands in a period. Think of it as how many people voted for a price move.

  2. A move on high volume means many traders took part. It's more convincing, like a vote with a big turnout.

  3. A big jump on tiny volume may be just a few traders. Those moves can fade as fast as they came.

  4. Traders take a breakout through resistance more seriously when volume rises with it.

  5. Note: forex has no central exchange, so currency charts usually show “tick volume”, the number of price updates, as a stand-in.

  6. Common mistake

    Mistake: chasing a thinly traded small stock that suddenly jumps. Low volume makes prices easy to push around, the classic setup for pump-and-dump schemes.

  7. Key takeaway

    Price tells you what happened. Volume tells you how many people agreed.

Quick check

  1. Volume measures... How much was tradedIt counts the shares or contracts that changed hands in the period.
  2. A price jump on very low volume is... Less convincingFew traders took part, so the move can fade quickly.
  3. Small stocks with low volume are... Easier to push aroundWith few buyers and sellers, a little money can move the price a lot.
  4. A breakout comes with the highest volume in months. Traders see that as... Stronger evidence the move is realMany people backing the move makes it harder to reverse quickly.

Words in this lesson

Reading Charts

  1. What is a candle, really?
  2. Line, bar and candle charts
  3. Trends: the walk of price
  4. Floors and ceilings
  5. Breakouts and fakeouts
  6. Timeframes: zoom in, zoom out
  7. Three candle patterns worth knowing
  8. Moving averages
  9. Momentum and the RSI
  10. Volume: how many voted
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