7 min read The Chartix Editorial Team
A phone lying on a dark wooden desk, its glowing screen showing soft rows of cyan bars beneath faint candle shapes, a notebook and pen beside it

Under almost every price chart sits a second, quieter chart: a row of vertical bars, one per candle, rising and falling with no obvious connection to the candles above them. Most traders learn to glance at it, few learn what it measures, and the advice attached to it (“volume confirms the move”) is repeated far more often than it is explained.

Volume in stocks is the number of shares that changed hands during a period, usually shown as one bar per candle. Every share traded has a buyer and a seller, so volume measures how much trading took place, not which side was stronger, and on its own it says nothing about where price goes next.

That last clause is where most explanations stop being careful. This post covers what the volume bar records, why “buying volume” is a misleading phrase, what the measured evidence on volume actually supports, and how chart patterns traditionally use it.

What is volume in stocks, exactly?

Volume is a count. For a single stock on an exchange, it is the number of shares that changed hands during the period the bar represents: a minute, an hour, a day, a week. If one investor sells 300 shares to another, volume rises by 300, not by one. The count is of shares, not of trades, which means one large order and three hundred one-share orders can produce the same bar.

Each volume bar lines up with the candle above it and covers exactly the same period. A daily candle and its volume bar describe the same session: the candle records four prices (open, high, low, close) and the volume bar records how much traded while price moved among them. If the four prices are new, how to read a candlestick covers what each one records and what the candle throws away.

Most charting platforms colour the volume bar to match its candle, green when the close was above the open and red when it was below. That colouring is a display choice, not a measurement. It does not split the bar into shares bought and shares sold.

Why is there no such thing as buying volume?

Every share that was bought was also sold. A session with ten million shares of volume had ten million shares bought and ten million shares sold, by definition. “Heavy buying volume” cannot mean that more shares were bought than sold, because the two numbers are always equal.

What people mean by the phrase is something narrower: that the trading happened while price was rising, which suggests that buyers were the side willing to pay up, crossing the spread to get filled, while sellers waited for their price. That is a reasonable inference, but it is an inference from price behaviour, not something the volume bar measured. The bar would look identical if the same shares had changed hands while price fell.

This is why volume cannot be read alone. It is a measure of participation that gets its meaning from the candle above it and from where that candle sits on the chart.

What does high volume actually tell you?

The most robust measured fact about volume is modest and old. In a survey of the research published in 1987, Karpoff found that volume tends to be larger when the absolute price change is larger: big moves, in either direction, come with more trading. News drives both. A company report, an index rebalance or a surprise rate decision brings more participants in, and price moves further because more of them are acting at once.

The practical reading that follows is about significance, not direction. A price move on volume well above the stock’s recent average involved more participants than usual, so it is harder to dismiss as a few orders in a thin market. A move on unusually light volume involved fewer, so it is easier for the next few orders to reverse. Neither tells you which way the next move goes.

This is why traders compare volume with the stock’s own average rather than reading the raw number. A million shares is enormous for a small company and a quiet morning for a large one. Volume relative to its own recent average (often called relative volume) is the version that means something on a chart.

Why is volume heaviest at the open and the close?

Volume is not spread evenly across the trading day. Jain and Joh’s 1988 study of hourly New York Stock Exchange data found trading volume higher at the start and end of the day than in the middle, a pattern often described as U-shaped. Part of this is structural: exchanges run opening and closing auctions, such as Nasdaq’s opening and closing crosses, which concentrate orders at those two moments, and many funds trade at or near the close.

Two practical consequences for reading a chart:

  • On an intraday chart, a tall volume bar in the first or last few minutes is normal, not news. Compare it with the same time of day on previous sessions, not with the midday bars.
  • On a daily chart, the closing price is set by an auction that many participants deliberately trade into, which is one reason the close is the price most patterns are defined on.

How do chart patterns traditionally use volume?

The pattern literature attaches a volume tradition to almost every shape. A few examples:

  • Contracting volume inside a consolidation. Bulkowski reports that volume trends downward during a symmetrical triangle 84% to 86% of the time in his data, consistent with participants losing interest as the range narrows. (The triangle itself needs converging lines with enough touches to be real, and a breakout read from it is invalidated by a close back through the far side of the pattern.)
  • Heavy volume on a breakout. The tradition says a break through a level on heavy volume is more trustworthy than one on light volume. Bulkowski’s symmetrical triangle figures show patterns with breakout volume above the 30-day average doing better after the breakout.
  • Volume at a level. Heavy trading at a price makes that price matter more, because more participants have a position there and a reason to react when price returns. The support and resistance post covers why a level that traded heavily tends to be a level that holds attention.
  • The volume curve under a slow pattern. The rounding bottom is traditionally drawn with volume shaped like the price: heavier on the way in, lightest at the low, heavier as price climbs out. (The pattern needs a prior decline into the bowl, and its read is invalidated by a close below the low of the curve.)

How good is the evidence for volume rules?

Thinner than the confidence with which they are repeated. Bulkowski, who has measured volume behaviour across dozens of chart patterns, summarises his own findings on his volume resource page with notable restraint: his studies show volume adds value, but he usually ignores it. On the same page he lists a study finding that after a high-volume breakout, performance does not improve much but failures triple (the page does not state that study’s sample, market or period).

That is the honest state of things. The association between volume and the size of price moves is well established. The specific rules that turn volume into a pattern filter (“only trust a breakout on twice average volume”) are mostly practitioner conventions, and the published measurements of them are mixed. Use volume to judge how much participation was behind a move. Do not treat any volume rule as a guarantee that the move will continue.

What volume cannot tell you

  • Direction. Every share bought was sold. Direction comes from price.
  • Who was trading. A volume bar cannot distinguish one institution from ten thousand individuals.
  • Intent. A spike can be a new position, an exit, a hedge or a fund rebalancing on a schedule that has nothing to do with the chart.
  • Anything outside the venue it counts. Consolidated US stock volume aggregates exchanges and off-exchange trades, but a crypto chart usually shows one exchange’s volume, and a retail forex chart usually shows tick volume (the number of price changes), not traded size. The bar looks the same and means something different.

How to read the volume bar without fooling yourself

Read the candle first: where it opened, where it closed, and where it sits relative to the levels and the trend. Then ask one question of the volume bar: was this more or less participation than usual for this stock, at this time of day? If more, the candle is harder to dismiss. If less, it is easier. That is the whole contribution, and it is a real one.

For the mechanics of the candle above the bar and the rest of the chart, start with how to read a stock chart.

Sources

Every figure above was checked against these before publishing.