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Volume and Volume Average

Definition:

Volume is the total number of shares of transacted during a specified period. Although this is a rather basic indicator, volume can provide some very powerful clues to anticipate price behavior.

In SwingTracker, you can color-code the volume to more easily see which periods the price went up or down. Depending on your background color, blue/green indicates an up period, red indicates a down period and gray/black indicates an even period. To turn on color-coding, go to "Utilities" >> "Parameters" and select "Volume".

In SwingTracker you can overlay a volume average over the volume bars. To activate the volume average and select its period, go to "Utilities" >> "Parameters" and select "Volume Average".

Interpretation:

One interpretation for volume can be used to determine the strength of a trend, or confirm the movement of the price. During trending markets, volume tends to be positively correlated with the direction of a trend. In a longer-term upward trend, there will tend to be higher volume as the price goes up and lower volume as the price goes down. During a longer-term downward trend, there will tend to be higher volume as the price goes down and lower volume as the price goes up. If these characteristics are not exhibited, it can potentially signal the changing of the overall trend. This analysis can also be done on shorter and intermediate trends with certain characteristics.

During sideways markets, a higher level of volume can mean that the price will break out of that trading range.

Prolonged periods of lower volume can indicate high levels of uncertainty about the future direction of the price, often found in sustained sideways markets or market bottoms.

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