Volume Explained: Why Some Price Moves Continue — and Others Fail
Poyon: “Doctor, sometimes a stock rises steadily, but other times it stops immediately even though the movement looks similar. Why is…
Volume Explained|Why Some Price Moves Continue — and Others Fail
Volume
Poyon
Poyon: “Doctor, sometimes a stock rises steadily, but other times it stops immediately even though the movement looks similar. Why is that?”
Dr. Poiful: “Ah, you’ve noticed an important point. What determines this difference is — volume.”
Poyon: “Volume… honestly, I haven’t paid much attention to it…”
Dr. Poiful: “Most people don’t. But listening only to the price and talking about the market is like trying to guess the number of people in a queue without hearing their footsteps.”
What is Volume?
Volume is an indicator that shows the number of shares traded during a specific period. It numerically represents how many participants are actively buying and selling.
① Basics
Diagram 1: Volume Bars Below Candlesticks
On a chart, volume is displayed as vertical bars at the bottom.
- Tall bars → active trading
- Short bars → low trading activity
The key is the height of the bars.
② Meaning of Volume Signals
Diagram 2: Same Price Movement, Different Volume
- Price rises + increasing volume Indicates that real buying pressure is pushing the price up. The trend is likely to continue.
- Price rises + decreasing volume Indicates that only a few participants are driving the move. This is often a temporary rise that may fade quickly.
- Price consolidates + increasing volume Even if the price appears flat, trading is active behind the scenes. This often precedes a significant upcoming price movement.
③ Reversal Signals
Diagram 3: Sudden Volume Spikes
Watch for sudden jumps in volume:
- Volume spike during a decline → Panic selling may be concentrated; a market bottom could be near.
- Volume spike during a rise → Profit-taking or selling may increase; a market top could be forming.
Volume often reflects market participants’ emotions, which are hard to see from price alone.
Dr. Poiful (aka Dr. Point HAKASE)
“The market doesn’t move by who wins, but by how many participate. Those who follow only the price react after the fact. Those who watch volume can sense the movement before it happens.”
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