Volume plays a very integral role in technical analysis

it helps us to confirm trends and patterns. Consider volumes as means to gain insights into how other participants perceive the market.


Volumes indicate how many shares are bought and sold over a given period of time. The more active the share, higher would be its volume. For example, you decide to buy 100 shares of Amara Raja Batteries at 485, and I decide to sell 100 shares of Amara Raja Batteries at 485. There is a price and quantity match, which results in a trade. You and I together have created a volume of 100 shares. Many people tend to assume volume count as 200 (100 buy + 100 sell) which is not the right way to look at volumes.

The following fictional example should help you understand how volumes add up on a typical trading day:

Sl NoTimeBuy QuantitySell QuantityPriceVolumeCumulative Volume019:30 AM40040062.204004000210.30 AM50050062.755009000311:30 AM35035063.103501,2500412:30 PM15015063.501501,400051:30 PM62562563.756252,025062:30 PM47547564.204752,500073:30 PM80080064.508003,300

At 9:30 AM there were 400 shares exchanged at the price of 62.20. An hour later, 500 shares were traded at 62.75. So at 10:30 AM if you were to check the total volume for the day, it would be 900 (400 + 500). Likewise 350 shares at 63.10 were traded at 11:30 AM, and upto 11:30 AM, the volume was 1,250 (400+500+350). So on, and so forth.

Here is a screen shot from the live market highlighting the volumes for some of the shares. The screen shot was taken around 2:55 PM on 5th of August 2014.

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If you notice, the volume on Cummins India Limited is 12,72,737 shares, likewise the volume on Naukri (Info Edge India Limited) is 85,427 shares.

The volume information that you see here is the cumulative volume. Meaning, at 2:55 PM, a total of 12,72,737 shares of Cummins were traded at various price points ranging from 634.90 (low) and 689.85 (high).

With 35 minutes left for the markets to close, it is only logical to expect the volumes to increase (of course assuming traders continue to trade the stock for the rest of the day). In fact here is another screen shot taken at 3:30 PM for the same set of stocks with volume highlighted.

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As you can see, the volume for Cummins India Limited has increased from 12,72,737 to 13,49,736. Therefore, for Cummins India the volume for the day is 13,49,736 shares. The volume for Naukri has increased from 85,427 to 86,712, making 86,712 shares as the volume for the day. It is important for you to note that the volumes shown here are cumulative.

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