What Is Volume In the Stock Market?

Volume is the only market indicator that does not lag behind price. While price tells you what happened, volume reveals how strongly the market believed in that move. In the Indian stock market, where NSE and BSE openly publish delivery data, volume becomes a powerful tool to separate genuine trends from short-term noise.

In this blog, we’ll help you understand what is volume in stock market, what it indicates, why it is important, how to check and calculate it, where to find it, and how volume and price are related.

What Is Volume in Share Market?

Trading Volume Meaning in Stock Market: Trading volume refers to the total number of shares of a stock traded (bought and sold) during a specific period, such as a day, week, or month. Think of volume as the intensity of participation. It tells you how many "hands" a stock changed during the day.

The "Single Count" Rule: For every trade, there is a buyer and a seller. These two together create one unit of volume. If you buy 100 shares of Reliance from a seller, the volume recorded is 100, not 200.

Don’t Confuse Volume with "Value"

It is important to distinguish between the quantity of shares and the amount of money involved.

Why this matters: A "Multibagger Penny Stock" might have massive volume (1 Crore shares) but very low traded value because the price is only ₹1. Institutional investors (the "Big Money") focus on stocks where both volume and value are high.

What Is Trading Volume ?

Trading volume tells you the "weight" behind a price movement. If price is the headline, volume is the full story. Here is exactly what volume indicates to a smart investor:

1. Conviction and Strength:

• High Volume: Indicates that many participants agree with the price move. It shows strong conviction. If a stock rises on high volume, it means "Big Money" is likely buying.
• Low Volume: Indicates a lack of interest. If a stock price rises on low volume, it’s like a car running on an empty tank; it could stall and reverse at any moment.

2. Market Liquidity:

Volume is the best measure of liquidity.

• High Volume Stocks are easy to buy and sell instantly at the price you want. (Example: Reliance, HDFC Bank).
• Low Volume Stocks are "illiquid." You might struggle to sell your shares if no one is there to buy them, or you might have to sell at a much lower price than expected (this is called Slippage).

3. Institutional Footprints:

In India, FIIs (Foreign Investors) and DIIs (Mutual Funds/LIC) manage thousands of crores. When they buy, they cannot do it quietly. They leave a "footprint" in the form of massive volume bars.

Key Insight: Retail traders (like us) cannot move a stock 5% on our own. If you see a 5% move with a massive volume spike, you are seeing the Institutions at work.

4. Validating Breakouts:

This is the most practical use of volume. Many stocks "break out" above a previous high, only to crash back down a day later (a Fakeout).

• A Real Breakout: Happens when the price breaks resistance, accompanied by a Volume Spike (at least 2x the average).
• A Fakeout: Happens when the price breaks resistance but volume remains low or flat.

Traded Volume vs. Delivery Volume

In the Indian markets (NSE/BSE), total volume is split into two types:

• Intraday Volume: Shares bought and sold within the same day (mostly speculators).
• Delivery Volume: Shares that actually move into a Demat account (long-term investors).

Pro Tip: Always look for the Delivery %. If a stock's volume is high but the delivery % is low (below 20%), it means the move is likely driven by "noise" or day traders. If delivery is high (above 40%), it suggests strong conviction from long-term players.

How To Calculate Volume in Stock Market?

While stock exchanges like the NSE and BSE calculate and publish these numbers automatically in real-time, it is important to understand the logic behind the data.

The formula for volume is straightforward:

Total Volume = Total Number of Shares Transacted

The "Single Count" Rule

Remember, every trade requires a buyer and a seller. They are two sides of the same coin.

1 Buy + 1 Sell = 1 Unit of Volume

If Investor A buys 500 shares of Infosys and Investor B sells those 500 shares to them, the volume is 500, not 1,000.

Example:

Imagine three trades happen in a stock within one minute:

Trader A buys 100 shares from Seller X.

Trader B buys 200 shares from Seller Y.

Trader C buys 50 shares from Seller Z.

The Total Volume for that minute is: 100 + 200 + 50 = 350 shares.

What about Intraday Trading?

If you buy 100 shares in the morning and sell those same 100 shares in the afternoon, you have participated in two separate transactions.

• The first trade (the Buy) adds 100 to the volume.
• The second trade (the Sell) adds another 100 to the volume.
• Your total contribution to the day's volume = 200.

A Common Beginner Mistake: Understanding Volume Bar Colours

If you look at a stock chart, you will see a row of green and red bars at the bottom. Most beginners assume:

Green volume bar = More people are buying.

Red volume bar = More people are selling.

This is a MYTH. Always remember the Golden Rule - Volume is Colour-Blind. In reality, volume itself has no colour. Every single trade requires exactly one buyer and one seller. You cannot have a "buy" without a "sell."

So, why are the bars colored? The volume bar simply matches the colour of the price candle for that period:

• If the stock price closed higher than it opened, the volume bar turns Green.
• If the stock price closed lower than it opened, the volume bar turns Red.

What does a "Massive Red Bar" Really Mean?

A giant red volume bar doesn't mean "everyone sold." It means there was massive participation from both buyers and sellers, but by the end of the day, the sellers were more aggressive, forcing the price to close lower.

Key Takeaway: Volume measures the size of the crowd, while the colour (price) tells you which way the crowd pushed the door.

Why Is Trading Volume Important?

In the stock market, price is the steering wheel, but volume is the fuel. Understanding volume helps you filter out market "noise" and focus on moves that have real strength behind them.

1. It Tracks "Big Money" Footprints:

In the Indian market, Institutional Investors (FIIs and DIIs) are the primary drivers of price. Because they trade in massive quantities, they cannot enter or exit a stock secretly. Their actions create large volume bars. By watching volume, you are not just guessing; you are following the "Smart Money."

2. It Measures Liquidity (The Exit Door):

Many beginners focus only on buying, but a trade is only successful if you can exit at the right price.

• High Volume = High Liquidity: You can sell large quantities (like 5,000 shares of Reliance) instantly without moving the price.
• Low Volume = High Risk: In "illiquid" stocks, there are very few buyers. If you want to sell at ₹100, you might be forced to sell at ₹95 because no one is willing to buy at your price.

3. It Spots "Fake" Moves:

Volume acts as a lie detector for price movements.

• Healthy Trend: Price goes up + Volume goes up. This shows the crowd is participating.
• Warning Sign (Negative Divergence): Price goes up + Volume goes down. This suggests the "Big Money" has stopped buying, and only a few retail traders are pushing the price higher. Such moves often lead to a sharp reversal or crash.

4. It Signals a "Climax" (Trend Reversal):

Sometimes, an extreme volume spike signals the end of a trend rather than the start.

• Buying Climax: After a long rally, a massive volume spike often means the last remaining buyers have finally jumped in (FOMO). With no one left to buy, the price often falls.
• Selling Climax: After a long crash, a massive volume spike can signal "panic selling," where the last discouraged investors sell. This is often where the "Smart Money" starts buying again, leading to a bottom.

Relative Volume & Volume Spikes (Advanced but Simple)

Volume should never be looked at in isolation. It must always be viewed relative to the stock’s historical behaviour.

Example: 1 Crore shares traded in a giant like Reliance is just a normal Tuesday. But 1 Crore shares traded in a small-cap stock (which usually trades only 50,000 shares) is an explosion of activity.

How to Identify a "Volume Spike"?

A volume spike is a sudden surge in trading activity that stands out from the rest.

Pro Tip for Beginners: Look for volume bars that are 2x or 3x taller than the 20-day average volume.

Why the 20-Day Average?

Using a 20-day average (roughly one trading month) helps you filter out daily "noise." When you see a 2x spike against this average, it usually indicates:

• Institutional Entry/Exit: A "Big Fish" is moving in or out.
• Corporate News: Earnings results, mergers, or major contract wins.
• Trend Change: A shift in market sentiment from bearish to bullish (or vice versa).

Relative Volume (RVOL)

Many professional platforms use a metric called Relative Volume (RVOL).

• RVOL of 1.0: The stock is trading exactly its normal volume.
• RVOL of 3.0: The stock is trading three times its usual volume. This is where the most profitable opportunities usually hide.

Volume and Price Relationship

Price and volume work together to reveal the "truth" behind a market move. While price shows the direction, volume confirms the conviction. Price is the steering wheel, but volume is the fuel.

The Auction (Party) Analogy

Think of the stock market like a party:

• Price is the number of high-fives happening.
• Volume is the number of people in the room.

If only two people are high-fiving (Price Up, Low Volume), the excitement is fake, and the party might end soon. But when the entire room joins in (Price Up, High Volume), the move is strong and sustainable.

Common Price-Volume Scenarios

Why This Relationship Matters

By combining these two, you can:

• Spot Traps: Avoid "Fake" breakouts where price jumps but volume stays flat.
• Follow the Big Players: High volume and rising prices usually indicate institutional buying (FIIs/DIIs).
• Know When to Exit: If your stock is rising but volume starts shrinking, it’s often a sign that the "smart money" has stopped buying.

Where and How to Check Volume in the Stock Market?

In the Indian market, volume data is widely available. Here is where you can find it and how to read it:

1. On Stock Charts (The Most Common Way): On almost every charting platform, volume appears as vertical bars at the bottom of the price chart.

Mobile App Tip: If you don't see these bars, tap on 'Indicators' or 'Studies', search for "Volume," and select it. It will now appear as a permanent fixture at the bottom.

2. Official Exchange Websites: For the most authentic data, you can visit the NSE or BSE websites.

• Total Volume: Updated every second during market hours.
• Delivery Volume: Only updated after the market closes (usually by 6:30 PM IST).

3. Financial Portals: Websites like Moneycontrol and Screener.in are great for checking the "Average Volume" over the last 5 or 30 days, which helps you identify if today's volume is a "spike" or just normal.

What Is "Active by Volume" in the Stock Market?

If you open the "Market Movers" section on your app, you will see a list called "Active by Volume." This refers to the stocks that have seen the highest number of shares traded during that session.

Why Traders Watch This:

• High Liquidity: These stocks are easy to enter and exit.
• High Volatility: Stocks with massive volume often have significant price swings, providing trading opportunities.

A Critical Warning for Beginners

Don't confuse "Active by Volume" with "Active by Value."

• Active by Volume: Often includes "Penny Stocks" (priced at ₹2 or ₹5) because it's easy to trade millions of such cheap shares.
• Active by Value: Usually includes blue-chip stocks like HDFC Bank or Reliance. Even if fewer shares are traded, the total rupee amount is massive.

Pro Tip: If a stock is "Active by Volume" but the share price is very low (under ₹10), be careful. It might be a "pump and dump" situation rather than a genuine institutional interest.

3-Step "Master Volume" Checklist for Your Next Trade

Before you click 'Buy' on your next stock, run it through this quick checklist:

1. The Spike Check: Is today's volume at least 2x the average of the last 20 days?
2. The Colour Logic: Does the volume bar colour simply match the price candle? (Don't let a "red" bar scare you if the volume is low.)
3. The Delivery Check: For Indian stocks, is the delivery percentage above 40%? (Wait for 6:30 PM for this data).

Conclusion

In the world of trading, price shows you the direction, but volume shows you the conviction.

By now, you understand that volume isn't just a set of bars at the bottom of your chart; it is the footprint of big institutional players. Whether you are an intraday trader looking for liquidity or a long-term investor tracking delivery volume on the NSE, paying attention to this "silent indicator" will help you:

• Filter out noise from genuine market trends.
• Avoid "bull traps" and fake breakouts.
• Follow the "Smart Money" by identifying institutional accumulation.

Remember, never look at price in isolation. The next time you see a stock jumping 5%, don't just ask "how much did it rise?", ask "how many people joined the move?" If the volume is there, the move is real. If not, it might be time to stay on the sidelines.

FAQs

1. What is the volume of a stock?

It is the total number of shares traded during a specific period.

2. What is volume in the share market?

Volume reflects how actively stocks are being traded and shows market participation.

3. How to calculate volume in the stock market?

Volume is calculated as the total number of shares exchanged during a specific period.

4. Can volume be manipulated?

In penny and illiquid stocks, yes. In large-cap stocks like Reliance or TCS, manipulation is extremely difficult due to high liquidity and institutional presence.