Advertisement

Volume Analysis in Stock Market with Example

Volume Analysis in Stock Market (Volume Trading Analysis)

Volume analysis in the stock market involves the study of the number of shares or contracts that are traded in a given period of time. It’s a valuable tool for technical analysis and can provide valuable insights into market sentiment, trend, and momentum.

Related to Share Market Articles
Target Price in the Share MarketWhat is VIX in Stock Market?
What are EMA and SMA in the Share Market?Upper Circuit and Lower Circuit
List of High Beta Stocks NSECalculate Average Price of Stock
Alpha and Beta in Stock MarketEquity vs Commodity
Bull and Bear in Stock MarketLTP
Leverage in Stock Market with ExampleATP
Margin in Intraday TradingHow to do Algo Trading in Zerodha
Call and Put in Stock Market with ExampleBest Dividend Paying Stocks
Stop Loss in the Share MarketInsider Trading in Stock Market
What are Different Types of Candles?NIFTY vs Bank NIFTY
How Many Types of InvestmentIntraday vs Long Term Investing
What is Order Type in Share MarketWhat is Trading in Stock Market
How many types of stocksSwing Trading in Zerodha
Transfer Shares via OnlineOptions Trading in Zerodha
Best Technical Analysis AppOptions in Stocks
NSDL vs CDSLFIIs and DIIs data
Top 5 stock markets in the worldWorld Stock Market Timings
Margin Trading PledgeWhich Share is Good to Buy?
Best Sector to Invest in Indian Stock MarketLong Position vs Short Position
200 DMA in Stock MarketRSI Stocks in NIFTY 50
Intraday vs Long Term InvestingBuy International Stocks from India
Demat Account in SBI-YONOSmall Case vs Mutual Fund
Small case in ZerodhaMCX in Zerodha
Buy DebenturesHow to Invest in NIFTY 50
Apply for Rights Issue OnlineBharat Bond ETF in Zerodha
Buy Unlisted SharesBonus Share - Record & Ex-Bonus Date
Bond vs EquityBond vs Debenture

Volume Analysis in Stock Market

Advertisement

Here are some key points to consider when conducting a volume analysis in the stock market:

  1. Plotting volume on a chart:
    The first step is to plot the volume data on a chart along with the price data. This allows you to visually see the relationship between volume and price.
  2. Identifying trends:
    Look for trends in the volume data to see if it's increasing or decreasing over time. If volume is increasing, it could indicate that more traders and investors are becoming interested in the stock and a potential uptrend may be developing. On the other hand, declining volume may indicate a lack of interest and a potential downtrend.
  3. Breakouts:
    If the stock breaks out of a trading range and there is a noticeable increase in volume, this can indicate a valid breakout and potential for further price appreciation.
  4. Divergences:
    Look for divergences between volume and price. For example, if the price of the stock is making new highs, but volume is declining, this could be an early warning of a potential trend reversal.
  5. Key support and resistance levels:
    Use volume analysis to identify key levels of support and resistance. High volume at a specific price level can indicate that it's a key level of support or resistance.
  6. Volume spikes:
    Large, sudden spikes in trading volume can be an indication of market manipulation, such as insider trading or pump and dump schemes.
  7. Average daily volume:
    You can calculate the average daily volume of a stock over a given period of time to get an idea of the average amount of trading activity.
  8. Volume-price relationship:
    Observe the relationship between volume and price. If prices are rising and volume is increasing, it could indicate a strong bullish trend. On the other hand, if prices are falling and volume is increasing, it could indicate a strong bearish trend.

In conclusion, volume analysis is an important tool for technical analysis that provides valuable insights into market sentiment, trend, and momentum. It should be used in conjunction with other technical analysis tools for a complete picture of market activity.

Best Stocks in 2023
Best Defence Sector Stocks in IndiaTop Ethanol Stocks in India
Best Green Hydrogen StocksBest Speciality Chemical Stocks
Highest Promoter Holding Penny StocksIndian Penny Stocks with Good Fundamentals
Best Sector to Invest in Indian Stock MarketBest Low Price Pharma Stocks
Railway Stocks in 2023

The Formula of Volume Analysis in the Stock Market

Advertisement

There is no specific formula for volume analysis in the stock market.
Volume analysis is a qualitative, rather than a quantitative, approach to technical analysis.
It involves observing and interpreting patterns and trends in the volume data, along with price and other technical indicators, to gain insights into market sentiment, trend, and momentum.

Some traders may use simple mathematical calculations, such as average daily volume, to help identify trends in volume data. However, the most important aspect of volume analysis is the interpretation
and visualization of volume data in the context of price and other market activity.

In summary, there is no single formula for volume analysis in the stock market,
but rather it involves a combination of observation, interpretation, and visualization of volume
data in the context of other market activity.

Related to Bonds Articles
RBI Bonds or Floating Rate Savings BondsCapital Gain Bonds
Treasury Bills in IndiaList of Government Bonds in India
RBI RDG Account NHAI Capital Gain Bonds
54 EC REC BondsRBI IINSS-C
PFC 54EC BondsTax-Free Bonds in India
Loan on Sovereign Gold BondTax Free Bonds NHAI
Sovereign Gold Bond Tax-ExemptionBuy SGBs from ICICI Bank
Sovereign Gold Bond in ZerodhaSovereign Gold Bond - Return Calculation
SBG SBICorporate Bonds vs Government Bonds
How to Buy Capital Gain Bonds OnlineBond vs Debenture
BI Bonds vs Tax Saving FD vs SGBsBond vs Equity
SGBs via Axis BankRBI Bonds via BOB, PNB, UBI & Canara Bank

Example

Advertisement

Here is an example of volume analysis in the stock market:

Suppose you're interested in analyzing the volume activity of a particular stock, let's say Company X.

  1. Plotting volume on a chart:
    The first step is to plot the volume data on a chart along with the price data. This allows you to visually see the relationship between volume and price.
  2. Identifying trends:
    You can then look for trends in the volume data to see if it's increasing or decreasing over time. If volume is increasing, it could indicate that more traders and investors are becoming interested in the stock and a potential uptrend may be developing. On the other hand, declining volume may indicate a lack of interest and a potential downtrend.
  3. Breakouts:
    If the stock breaks out of a trading range and there is a noticeable increase in volume, this can indicate a valid breakout and potential for further price appreciation.
  4. Divergences:
    You can also look for divergences between volume and price. For example, if the price of the stock is making new highs, but volume is declining, this could be an early warning of a potential trend reversal.
  5. Key support and resistance levels:
    You can also use volume analysis to identify key levels of support and resistance. High volume at a specific price level can indicate that it's a key level of support or resistance.
Related to IPO Articles
Face Value in IPO – How to Calculate Face ValueLot Size in IPO
Book Built IssuePrice Band
Undersubscribed IPOListing Gains in IPO
When Can I Sell IPO SharesTypes of Investors in IPO
How Many Lots Can We Buy in IPOOversubscribed IPO
SEBI NEW Rules for IPO ApplicationIPO Blocked Amount not Refunded
Grey Market & Grey Market PremiumApply for SME IPO Online
IPO Applying TimeNFO in Zerodha - NFO vs IPO
Face ValueLot Size
How Many Lots Can We Buy in IPOCut Off Price
When Can I Sell IPO SharesIPO vs Shares(Listed)
GreenShoe Option (GSO) in an IPOBenefits of IPO for Investors
Listing Gains in IPOFPO - IPO vs FPO
Applying IPO Online using SBI YONOIPO or FPO via HDFC Bank
IPO via ICICI Bank IPO via UPI

FAQs

Advertisement
  1. What is volume analysis in the stock market?

    Volume analysis in the stock market involves the study of the number of shares or contracts that are traded in a given period of time. It provides valuable insights into market sentiment, trend, and momentum and can be used as a tool for technical analysis.

  2. Why is volume analysis important?

    Volume analysis is important because it provides valuable insights into the level of interest and activity in a stock or market. It can help traders and investors to identify trends, potential breakouts, and key levels of support and resistance.

  3. How is volume analyzed in the stock market?

    Volume is analyzed in the stock market by plotting volume data on a chart along with price data and looking for trends, divergences, and relationships between volume and price. Volume analysis should be used in conjunction with other technical analysis tools for a complete picture of market activity.

  4. What is an average daily volume?

    Average daily volume is the average number of shares or contracts that are traded in a given stock or market over a given period of time, typically a day or week. It can be used as a rough estimate of the average level of trading activity.

  5. What is the relationship between volume and price?

    The relationship between volume and price can provide valuable insights into market sentiment, trend, and momentum. If prices are rising and volume is increasing, it could indicate a strong bullish trend. On the other hand, if prices are falling and volume is increasing, it could indicate a strong bearish trend.

  6. What are volume spikes and why are they significant?

    Volume spikes are sudden increases in trading volume, often accompanied by significant price movements. They can indicate market manipulation, such as insider trading or pump and dump schemes, and should be carefully monitored.

  7. Can volume analysis be used in other financial markets?

    Yes, volume analysis can be used in other financial markets, including futures, forex, and cryptocurrency markets, to gain valuable insights into market sentiment, trend, and momentum. The principles of volume analysis remain the same, regardless of the market being analyzed.

Advertisement
Advertisement