Volume basics: what trading volume tells you and where it is missing

Volume is the amount traded in a given period: shares, contracts or coins that changed hands. In markets where it is measured, it adds a second dimension to price, showing how much participation stood behind a move. This page explains what volume can tell you, why forex has only an approximation of it, and, plainly, why you cannot use volume analysis on Sky Trade, because Sky Trade's feed contains prices only.

What volume shows in real markets

On a centralised exchange, such as a stock or futures exchange, every trade is recorded, so total volume per candle is a real figure. Traders use it in a few classic ways:

• Confirmation. A breakout above resistance on rising volume suggests many participants acted on it. The same breakout on thin volume is easier to doubt.
• Exhaustion. A very large volume spike after a long trend can mark a climax, where the last buyers or sellers finally act.
• Divergence. Price making new highs while volume keeps shrinking suggests fewer participants are pushing the move.
• Liquidity. Higher volume usually means it is easier to trade without moving the price.

None of these readings works automatically. Volume spikes also come from index rebalancing, option expiries and large single orders that say little about future direction.

A worked example from an exchange market

Imagine a stock that has been stuck below $50 for two weeks with daily volume of about 1 million shares. One day it closes at $51 on 3 million shares. A volume-aware trader reads this as a breakout with participation behind it.

A week later it rises to $53, but on 600,000 shares a day. Price is higher, interest is lower. That does not mean a fall is coming; it means the move is being carried by fewer participants, so the trader becomes more cautious. The next session it falls back to $50 on heavy volume, and the "breakout" turns into a false breakout. Volume helped describe what happened; it did not predict it.

Forex has no central volume

Spot forex is traded over the counter between banks, brokers and other institutions across many venues. There is no single exchange that records every trade, so true total forex volume per candle does not exist in public data.

What many charting platforms show instead is tick volume: the number of price changes in a period. The assumption is that more activity produces more price updates. Tick volume often rises during the London and New York sessions and around major news, so it can serve as a rough activity gauge. But it counts updates from one data source, not money traded, and two sources can show very different tick volume for the same pair. The glossary entry on tick volume has more detail.

Sky Trade has no volume data

This needs to be said directly. Sky Trade's price feed contains prices only. There is no real traded volume and no tick-volume indicator on the chart, so any volume-based technique, from volume confirmation of breakouts to volume divergence, cannot be applied in the terminal.

• Market pairs on Sky Trade use real interbank quotes, but the feed carries no volume.
• OTC instruments are a different case entirely. Their prices are generated by Sky Trade's server with a random-walk model and do not follow any real market. No one is buying or selling an underlying asset there, so there is no volume to measure in principle, and the model makes the next move unpredictable. See what OTC means.

If you read elsewhere that a strategy "needs volume confirmation", it is not usable on Sky Trade as written. Do not try to substitute something that looks similar, such as candle size, and call it volume.

What you can use instead

Several things on the chart describe activity without pretending to be volume:

• Volatility. ATR and Bollinger Band width show how large candles are. That is not participation, but it does show when the market is lively or quiet.
• Session timing. Major forex pairs tend to be more active when large financial centres overlap. The market-hours tool shows when sessions open and close.
• Price behaviour at levels. How price reacts at support and resistance, cleanly or hesitantly, is information in itself.

Short expiries

Even in markets that have real volume, per-candle volume on very short timeframes is noisy. A single large order can dominate a 5-second bar. For short expiries, volume is usually read on higher timeframes as context, not as a trigger. On Sky Trade, this whole question is moot because there is no volume data.