Volume: the weight behind a move

What volume is

Volume is the amount traded in a period, shown as bars under the price chart, one bar per candle. A tall bar means a lot changed hands; a short bar means little did.

Price tells you where the market went. Volume tells you how much conviction was behind it.

Volume inside patterns

Volume follows a common rhythm in chart patterns.

• During the formation, it fades. A pattern is a pause: buyers and sellers are roughly balanced, and fewer traders act. Shrinking volume inside a flag or triangle is normal.
• On the breakout, it jumps. A close through the level on high volume shows many traders acting on the break. That is the chart above: quiet while the triangle forms, the tallest bar on the breakout candle.
• Some patterns have their own shape. In a rounding bottom, volume dries up at the low and returns on the way back up.

Reading volume

• Rising price, rising volume: broad participation behind the move.
• Rising price, falling volume: fewer traders pushing it higher. The move may be tiring.
• Breakout on thin volume: few traders stand behind it, and it is more likely to fail. See breakouts and fakeouts.
• A volume spike after a long move: often a climax, where the last buyers (or sellers) rush in.

None of these is a rule. They are clues that make a pattern’s story more or less convincing.

A caution about crypto volume

Crypto trades on many exchanges at once, and each chart shows the volume of its own exchange or data source. Figures differ between sites, and some exchanges have been found to inflate their reported volume with trades against themselves, known as wash trading. Compare volume from the same source over time, not across different sites.

Common mistakes

• Reading volume in isolation. High volume only means something compared with that market’s usual volume.
• Treating volume as direction. A spike shows activity, not which side will win.
• Comparing across exchanges. Pick one source and use it consistently.