What is Volume Analysis?

Volume analysis is the study of trading volume data to understand market participation levels and validate price movements. It helps traders assess the strength of trends, identify potential reversals, and confirm breakouts by examining the relationship between price and volume.

Key Components

Volume Indicators

• Volume bars
• On-Balance Volume (OBV)
• Volume Profile
• Money Flow Index
• Volume-Weighted Average Price (VWAP)

Analysis Methods

• Volume-price correlation
• Volume trend analysis
• Divergence identification
• Accumulation/distribution
• Volume spikes

Trading Applications

Signal Confirmation

• Trend strength validation
• Breakout confirmation
• Reversal signals
• Support/resistance levels
• Market participation

Pattern Recognition

• Volume climax
• Volume dry-up
• Churn patterns
• Absorption volume
• Distribution patterns

Related Terms

• Volume Profile
• Technical Analysis
• Market Structure
• Price Action