Importance of volume

Volume is important because volume defines the strength of a trend. Generally speaking, the lower the volume the less confidence you can have in the trend or trend change. The greater the volume, the higher your confidence that the trend will continue or that the trend change will be sustained and not transitory.

A useful analogy with volume is to regard it as being similar to water flow in a river. When the river is high, the flow is large and powerful and not easily changed or diverted. When the river is low, the flow is weak and easily changed or diverted and could even peter out entirely. So it is with share trade volume in that low-volume trends or changes in trend are weak and are far more likely to peter out than those based on high volume.