Volume Analysis Explained:
A Complete Beginner's Guide
An educational overview of volume analysis, covering volume bars, spikes, rising vs falling volume, price-volume confirmation, and volume during breakouts.
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Welcome to Group C of the Technical Analysis module: Volume & Indicators. This unit begins with volume analysis, building on the brief introduction to volume provided in the previous group's lesson on breakout confirmation.
This overview introduces five areas covered in this unit: volume bars, volume spikes, rising versus falling volume, price-volume confirmation, and volume specifically during breakouts and reversals.
This is general educational content. It does not suggest that volume analysis, on its own, provides a guaranteed trading signal.
What Is Volume?
Volume refers to the amount of trading activity that occurs during a given period, typically displayed as a bar chart beneath the main price chart, with taller bars representing higher activity and shorter bars representing lower activity.
An Important Note for Spot Forex Trading
Before proceeding, it's important to understand a key distinction relevant to forex specifically. Unlike centralized exchanges (such as most stock exchanges), the spot forex market is decentralized, meaning trades occur across a global network of banks, brokers, and other participants rather than through a single central exchange. Because of this structure, there is no single, complete figure for total global forex trading volume available to any individual broker or platform.
As a result, forex trading platforms generally display what's called "tick volume" rather than actual traded volume. Tick volume counts the number of price changes (ticks) that occur within a given period, used as a proxy or approximation for actual trading activity, rather than a precise count of the number of units or currency value actually traded. This distinction is worth keeping in mind throughout this unit and is explored further in the following lessons.
What's Covered in This Unit
- Volume bars β how volume is typically displayed on a chart.
- Volume spikes β what a notably higher volume bar can suggest.
- Rising volume vs falling volume β trends in volume over time.
- Price-volume confirmation β using volume alongside price movement.
- Volume during breakouts and reversals β applying volume analysis to the breakout concepts from the previous group.
π Summary
Volume measures trading activity during a given period, typically shown as a bar chart, though it's important to understand that spot forex platforms generally display tick volume (a count of price changes) rather than actual traded volume, given the decentralized structure of the forex market. This unit explores volume bars, spikes, rising/falling trends, price-volume confirmation, and volume specifically in the context of breakouts and reversals.
Frequently Asked Questions
What is volume?
The amount of trading activity occurring during a given period, typically displayed as a bar chart beneath the price chart.
Why is volume different for forex compared to stocks?
Forex is a decentralized market without a single central exchange, so platforms typically display tick volume (a count of price changes) rather than actual traded volume.
What is tick volume?
A count of the number of price changes within a period, used as a proxy for actual trading activity in decentralized markets like spot forex.
Does volume analysis provide a standalone guaranteed signal?
No, this unit presents volume as one analytical tool among several, not a standalone, guaranteed signal.
Risk Warning
Trading forex and CFDs involves significant risk and may not be suitable for all investors. You may lose all of your invested capital. Please ensure you fully understand the risks before trading.
GTCFX operates as a multi-regulated group of companies, clients are kindly advised to confirm the specific legal entity, regulation, and jurisdiction under which they are being onboarded.
