Trading volume measures the total amount (in dollars or tokens) of an asset traded over a specific time period, typically displayed as 24-hour volume or volume per candle on charts. High volume confirms price moves and indicates strong conviction from buyers or sellers, while low volume suggests weak momentum and potential price reversals. Volume analysis helps validate breakouts (high volume = real move, low volume = fake breakout), identify accumulation or distribution phases, and spot exhaustion where increasing prices meet declining volume. Volume often precedes price—watch for volume spikes before major moves.
Example:
Bitcoin rallies from $75,000 to $80,000 on 25 billion dollars in 24-hour volume—50% above the recent average of 16 billion. This high volume confirms strong buying conviction and validates the breakout as real, not manipulation. However, when Bitcoin pushes from $80,000 to $82,000 on only 12 billion in volume (50% below average), the declining volume signals exhaustion and warns of an incoming correction. Sure enough, Bitcoin pulls back to $77,000 as the low-volume rally couldn't sustain itself.