Volume is the number of shares, or contracts for futures and options, that changed hands during a period. On most charts it is drawn as bars under the price: one bar per candle, often coloured green for an up candle and red for a down one. Price tells you what happened; volume tells you how many people took part.
Every trade has a buyer and a seller, so volume is not "buying" or "selling" by itself. What it measures is activity and conviction. A price move that thousands of traders join is more meaningful than the same move on a quiet afternoon with few orders.
Why volume matters
- Confirmation. A breakout above resistance on twice the normal volume shows real demand. The same breakout on half the normal volume may just mean there were no sellers that day, and often fails.
- Exhaustion. After a long rally, a huge volume day with little price progress can mean large holders are selling into the buying.
- Interest. A stock whose volume suddenly jumps is getting attention, often because of news, results or a block deal.
- Liquidity. High average volume means you can usually buy and sell without moving the price much. Low volume means wider spreads and harder exits.
Relative volume: compare a stock with itself
Raw volume numbers are not comparable across stocks. A bank stock may trade crores of shares a day and a small company a few thousand. What matters is volume relative to the stock's own average.
Relative volume = today's volume ÷ average daily volume (often 20 days)
Example: State Bank of India averages about 1.2 crore shares a day over 20 days (an illustrative figure). Today it trades 3 crore shares while rising 3%. Relative volume = 3 ÷ 1.2 = 2.5: two and a half times normal participation. That rise had broad backing. If it had risen 3% on 0.8 crore shares (relative volume 0.67), the move would have been on below-average participation and is easier to reverse.
Intraday, compare volume at the same time of day. Volume is always high in the first and last 30 minutes of the NSE session and lower around midday, so 11:00 volume should be compared with other days' 11:00 volume.
Volume patterns to recognise
| Price | Volume | Common reading |
|---|---|---|
| Rising | Rising | Healthy uptrend with growing participation |
| Rising | Falling | Rally losing participation; be cautious |
| Falling | Rising | Strong selling pressure |
| Falling | Falling | Selling drying up; a pullback rather than a collapse |
| Breaking a level | Spike | Breakout with conviction |
| Little change | Very high | Heavy two-way trade; a possible turning point |
These are tendencies, not rules. They help you ask better questions about a move.
Live example: a stock's indicators and its volume
Each stock's technicals page shows daily volume bars under the candlestick chart. Here are the current readings for State Bank of India:
Check the price change in the first row, then open the technicals page and compare today's volume bar with the bars of the last few weeks. A large move on a bar much taller than usual is the kind of move volume analysis takes seriously. If the stock is near its S1 or R1 pivot level, high volume there shows whether that level is being defended or broken.
A worked breakout example
Suppose a mid-sized company has traded between ₹480 and ₹520 for three months. Its 20-day average volume is 4 lakh shares. Two scenarios:
- Day A: the stock closes at ₹532, above the ₹520 ceiling, on 11 lakh shares: relative volume 2.75. Many participants agreed on the higher price. Traders would treat this breakout seriously and watch whether later pullbacks hold near ₹520, the old resistance.
- Day B: the stock closes at ₹532 on 3 lakh shares: relative volume 0.75. The price is above the ceiling, but fewer shares traded than on an average day. This kind of breakout often slips back into the range within days, a false breakout.
The price chart looks identical on both days. Only volume tells them apart. The breakouts guide covers how traders handle the second case.
The opposite extreme is a climax: after a long move, a day with the highest volume in months and a very wide range. At the end of a long fall, such a day can mark panic selling that exhausts the sellers; at the end of a long rise, it can mark the last buyers rushing in. Climaxes are easy to see afterwards and hard to call in real time, so treat them as a reason to watch closely rather than to act.
Delivery volume: an Indian speciality
NSE publishes, for every stock, how many of the day's traded shares were actually delivered: bought and kept in a demat account, rather than bought and sold within the day. The delivery percentage is delivered quantity ÷ traded quantity.
- A rise on high volume and a high delivery percentage suggests buyers are holding the shares, not just trading them.
- A big volume day with low delivery percentage is mostly intraday speculation.
Delivery percentages vary a lot between stocks, so again compare a stock with its own history. The delivery percentage guide goes deeper.
Volume indicators
- Volume moving average: a 20-day average line over the volume bars, the simplest way to spot spikes.
- On-Balance Volume (OBV): adds the day's volume when the stock closes up and subtracts it when it closes down, giving a running total. If OBV rises while the price is flat, volume is building on up days.
- Volume profile: shows how much volume traded at each price rather than each time. Prices with heavy volume often act as support or resistance.
- VWAP: the average price weighted by volume during the day.
Volume in futures and options
In derivatives, volume is the number of contracts traded, and it sits next to open interest, the number of contracts still open. Volume measures activity today; open interest measures positions carried. A price rise with rising open interest suggests new positions are being built; a rise with falling open interest suggests short sellers are closing. The open interest guide explains how to read the two together. The scans page lists stocks with volume spikes today, and the screener can filter by relative volume.
Common mistakes
- Comparing volume between stocks. Always compare with the stock's own average.
- Reading one spike as a trend. Index rebalancing days, block deals and F&O expiry can create huge volume that says nothing about future direction.
- Forgetting the time of day. Intraday volume is naturally high at the open and close.
- Ignoring corporate actions. After a split, share volume jumps because there are more shares; adjust before comparing.
- Treating volume as direction. Every share bought was sold by someone. Volume shows how strongly people disagreed at that price, not who won; the price and the close tell you that.
Volume is the fuel behind price moves. Learning to check it before trusting a breakout, a pattern or an indicator signal is one of the simplest habits that improves chart reading.