What trading volume is
Volume is the amount of an asset changing hands over a period — how many shares, contracts, or coins were exchanged in a session, an hour, a candle. If price tells you where the market went, volume tells you how many participants actually stood behind that move.
Why volume matters
The same price move with different volume tells two different stories: a break above resistance on heavy volume shows real money behind it; the same break on thin volume is a move without troops. Volume is also tied to liquidity — where volume is deep, large orders move price little; where it is thin, slippage is the price you pay.
Volume types by asset and mechanism
- Real volume (centralized markets): stocks, listed derivatives, crypto on each exchange — every trade matches through one shared order book, so volume is counted exactly, unit by unit.
- Tick volume (OTC markets): forex and CFDs have no central order book, so the "volume" displayed is usually the number of price changes (ticks) — an indirect proxy for activity, not measured money flow. Empirical studies find tick volume correlates well with real volume, but the two are not the same thing.
- Unit volume versus value volume: the same session can be measured in units traded or in total money value. When comparing instruments with very different prices, money value usually says more.
- Open interest (derivatives only): the number of contracts currently open — distinct from volume, which counts contracts traded. Volume measures activity within the session; open interest measures positions still alive. The two complement, not replace, each other.
- A note on crypto: volume is fragmented across hundreds of venues, and part of it can be inflated by wash trading on poorly supervised exchanges — aggregate figures deserve a skeptical read.
How volume is read
Volume means something next to its own history: heavy or thin against its recent average, rising or falling as price enters an important zone. The absolute number says little — context carries the information. Volume indicators (OBV, VWAP, Volume Profile) are systematic ways of doing this reading.
Common mistakes
- Reading forex tick volume as real money volume: it is an activity proxy, not measurable flow.
- Comparing absolute volume across different instruments: each has its own baseline — comparison against its own average is what means something.
- Confusing open interest with volume in derivatives: two measures of different nature.
- Taking aggregate crypto figures at face value: which sources, which venues counted — questions to ask before trusting.
FAQ
- Is forex volume trustworthy? Tick volume reflects activity and usually moves in step with real volume, but it does not measure money. Useful for relative comparison across time; not meaningful as an absolute figure.
- Is high volume good or bad? Neither — it only says many participants stood behind the move. Meaning depends on context: heavy volume at a breakout is a different story from heavy volume at a top after a long advance.
- What does rising open interest mean? New contracts are being opened — the market is attracting positions. It does not say which side is winning; only that the game is getting more crowded.