Skip to content

Trading Volume: What the Number of Shares Traded Does and Does Not Show

Volume counts how many shares changed hands. How to read volume bars, why every trade has a buyer and a seller, what spikes mean, and what OBV adds.

By Published 3 min read

Reign Creative LLC makes Learn to Trade Stocks Beginner, which this article links to, so we have a commercial interest in it. How we write and check articles.

AI-assisted article. Drafted with AI tools from the sources cited below and checked by automated tests and an AI editorial review. No person has reviewed it yet. How we write and check articles.

Key takeaways

  • Volume is the number of shares that changed hands in a period; every share traded had both a buyer and a seller.
  • Volume measures activity, not direction: high volume does not by itself mean buyers or sellers are winning.
  • Compare a day's volume with the stock's own average; a spike shows unusual activity, which may follow good or bad news.
  • Higher volume tends to go with narrower spreads and easier trading; extended-hours trading is much thinner than the regular session.
  • Indicators such as On Balance Volume add up volume on up days and subtract it on down days, but they still describe the past.

Below many price charts sits a row of bars: volume. It is a simple market statistic, the number of shares that changed hands, and it is easy to read more into it than it contains. Knowing what it can and cannot tell you makes the rest of the chart easier to read.

What volume measures

Volume is a count of shares traded in a period: a minute, a day, a week. A stock that traded 2 million shares today had a daily volume of 2 million. StockCharts' ChartSchool notes that on most stock charts, volume bars are displayed at the bottom, so the price history and the trading activity can be read together.

The single most important fact about volume: every share traded had a buyer and a seller. When 2 million shares change hands, 2 million shares were bought and 2 million were sold. Volume therefore measures how much trading happened, not which side "won". Phrases such as "heavy buying pushed the stock up" describe the price change; the volume alone cannot.

Reading volume against its own average

Raw volume is hard to interpret on its own: 500,000 shares is enormous for one company and negligible for another. Two comparisons help:

  • Average daily volume: the typical volume over recent weeks or months, which a quote screen may show.
  • Relative volume: today's volume divided by the average. A value of 3 means three times the usual activity.

Example. A stock that usually trades 1.5 million shares a day trades 4.5 million today: relative volume is 4.5 ÷ 1.5 = 3. Something drew three times the usual activity, perhaps news such as earnings, which FINRA notes are normally released outside regular hours. A spike tells you something happened; it does not tell you whether it was good or bad.

Volume and the price you pay

ChartSchool's overview of technical analysis notes that heavily traded stocks allow investors to trade quickly because there are many buyers and sellers, while in a thinly traded stock you may have to change your entry or exit price considerably to make a trade, and low-liquidity stocks' prices are easier to manipulate. Lower volume is also one reason a bid–ask spread can be wider.

The same applies across the trading day. FINRA's guide to extended-hours trading notes that activity outside regular hours is dwarfed by the tens of millions of transactions in the regular session, so orders may be filled partly or not at all, and prices can be less competitive. Stock market hours covers those sessions.

Volume with price

Chart readers combine volume with the price move in the same period, for example when judging a move through a level in support and resistance. ChartSchool's overview describes volume-based indicators as a way to measure buying or selling pressure. These are interpretations, not rules, and like other chart readings they can fail.

On Balance Volume

ChartSchool describes On Balance Volume (OBV), developed by Joe Granville and first explained in his 1963 book, as one of the earliest measures to track the inflow and outflow of volume. Its rule is simple:

  • If today's close is above yesterday's, add today's volume to the running total.
  • If it is below, subtract it.

Example. Day 1 volume 8,200 (the starting value). Day 2 closes higher on 8,100: OBV = 16,300. Day 3 closes lower on 8,300: OBV = 8,000. ChartSchool stresses that the OBV's scale is not meaningful; analysts look at whether the line is rising or falling compared with previous periods.

ChartSchool records that Granville theorised that volume precedes price: a rising OBV reflects positive volume pressure that can lead to higher prices, and a falling OBV negative pressure. That is a theory, not a rule. OBV also assigns a whole day's volume to one side based only on the close, which is a crude simplification of thousands of trades. Like other indicators, it summarises the past.

A warning about volume and fraud

The SEC describes pump-and-dump schemes as touting a small microcap stock with false or misleading claims, urging people to buy quickly, then selling into the buying frenzy that creates. Heavy activity in a little-known stock can therefore make it look popular for exactly the wrong reasons. Investment fraud red flags explains the pattern.

Seeing volume in practice

Learn to Trade Stocks Beginner includes chart-reading lessons, and its chart replay lets you step through simulated price action with a virtual balance. Its listing notes that indicators summarise price or volume information but cannot confirm a future outcome. It is one of our education apps, and the investing basics hub links the related chart guides, including how to read candlestick charts.

Good to know

Frequently asked questions

What does trading volume mean?
The number of shares traded during a period, such as a day. If 2 million shares of a stock changed hands today, its daily volume is 2 million. On most charts it appears as bars beneath the price.
Does high volume mean a stock will go up?
No. Every share traded has a buyer and a seller, so volume shows how much trading happened, not which side was more eager. High volume on a rising day and high volume on a falling day are both possible, and neither predicts the next move.
Why is volume lower after hours?
Fewer participants trade outside regular hours. FINRA notes extended-hours activity is still dwarfed by the tens of millions of transactions in the regular session, which is why orders may fill partly or not at all, often at less competitive prices.
What is On Balance Volume?
An indicator developed by Joe Granville that keeps a running total of volume, adding a day's volume when the price closes higher and subtracting it when it closes lower. ChartSchool notes the scale itself is not meaningful; analysts look at whether the line is rising or falling.

Sources

  1. On Balance Volume (OBV) (ChartSchool) (opens in a new tab)StockCharts.com — accessed
  2. Technical Analysis (ChartSchool) (opens in a new tab)StockCharts.com — accessed
  3. Extended-Hours Trading: Know the Risks (opens in a new tab)FINRA — accessed
  4. Updated Investor Alert: Social Media and Investing – Avoiding Fraud (opens in a new tab)Investor.gov, U.S. Securities and Exchange Commission — accessed
  5. Bid–ask spread (opens in a new tab)Wikipedia — accessed

About the author

— The independent app studio that builds the apps covered on this site and publishes every article here. On Google Play it publishes as Reign Collective Apps.

We use AI tools to help research, draft and edit our articles. Each article lists the sources its factual claims rely on, and details about our apps come from their live Google Play listings. No article on this site has been reviewed by an independent expert unless the reviewer is named on it.

No person at Reign Creative LLC has read this article in full. It was published after automated checks and an AI editorial review, which are described in our editorial policy and are not the same as a person reading every sentence.

Spotted an error? Tell us — how corrections are handled is set out in our editorial policy.

Keep reading