Learn how to use volume to confirm trends, identify divergences, and find buy/sell signals through volume contraction patterns.
Volume is the core measure of market participation. Price movements need volume confirmation to be credible. Price changes without volume support are often unsustainable.
Volume increases as price rises — a healthy uptrend signal indicating growing capital inflows.
Price rises but volume shrinks — a warning of weakening momentum. The uptrend may be running out of steam.
Heavy volume accompanies price drops, indicating strong selling pressure. At market tops, this may signal distribution.
Decreasing volume during price drops may mean selling pressure is easing and a bottom could be forming.
When price makes new highs but volume fails to confirm with new highs, it's called "volume-price divergence" — an important warning of potential trend reversal.
Pullbacks on declining volume during an uptrend represent healthy corrections and often present good buying opportunities.
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