What it means
Rising volume behind a move suggests conviction. Spot forex shows broker tick volume, not total market volume.
In practice
Volume shows how much participation was behind a move. A breakout on volume well above average had real interest behind it; one on low volume is more likely to fail. A sharp spike at the end of a long move often marks a climax.
Traders compare each bar with the recent average rather than reading the raw number, and note the time of day, since the open and close are always the busiest.
What to watch for
Volume does not show direction: every trade has a buyer and a seller. In forex and CFDs the figure comes from your broker only, so treat it as a rough guide.
Related terms
4 terms- Tick volumeThe number of price changes in a candle, used as a stand-in for volume in spot forex.
- VWAPThe volume-weighted average price of the session; above it leans bullish, below it bearish.
- Volume profileVolume shown by price instead of by time; the busiest price is the point of control (POC).
- Open interestOIThe number of futures or options contracts that are open and not yet closed or settled.