FL
Volume is the number of shares traded in a given period. It is one of the most underrated yet powerful tools in technical analysis. While price tells you what happened, volume tells you how much conviction was behind it. A price move on high volume is far more significant than one on low volume.
Volume confirmation follows a simple principle: in a healthy uptrend, volume should increase on up days and decrease on down days. This shows buyers are more aggressive than sellers. The opposite pattern (rising volume on down days) suggests the trend may be weakening.
Volume spikes signal important events. When volume surges to 2-3x its 20-day average, something significant is happening — institutional buying, news catalysts, or a technical breakout. FoudaLens tracks relative volume and flags unusual activity in its scoring system.
On-Balance Volume (OBV) is a cumulative indicator that adds volume on up days and subtracts on down days. When OBV trends upward while price is flat, it suggests accumulation — smart money is quietly buying before a move higher. This is what the FoudaLens "Smart Money Detection" layer tracks.
Volume at price levels matters too. High volume at a specific price creates strong support or resistance. This is because many investors bought or sold at that level and will react when price returns to it. FoudaLens uses this concept in its Liquidity Vacuum detection — identifying low-volume price zones where fast moves can happen.
Practical volume rules: (1) Never trust a breakout without volume confirmation. (2) Decreasing volume during a pullback in an uptrend is healthy. (3) Extremely low volume days often precede big moves (this is the Volatility Squeeze). (4) Volume divergence (price up, volume down) is an early warning sign. This is not financial advice.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.