The Power of Volume: Decode Price Strength

✅ VOLUME ANALYSIS

“Price shows what happened. Volume shows WHY it happened.”

Volume is the fuel of the market.
A trend without volume is weak.
A breakout without volume is fake.
A reversal with high volume is REAL.

In this chapter, you will learn:

• How to read volume clearly

• How to combine volume with price action

• How to detect traps

• How to identify real breakouts

• How institutions enter the market

• How to use volume for option buying/selling decisions

1. What Is Volume?

Volume represents the number of shares/contracts traded in a candle.

High volume means:

• Big players active

• Strong intention

• Confidence in move

Low volume means:

• Retail-driven

• Weak move

• No commitment

2. The 4 Types of Volume You Must Understand

These four concepts improve your accuracy instantly:

A. Increasing Volume

When volume rises candle after candle:

• Trend is gaining strength

• Buyers/sellers are confident

• Move is sustainable

Used for:
✔ Trend following
✔ Pullback entry confirmation

B. Decreasing Volume

Volume reduces over time:

• Trend is weakening

• Breakout may fail

• Buyers losing strength

• Sellers losing pressure

Used for:
✔ Identifying reversals
✔ Avoiding trap entries

C. Volume Spike

A sudden large bar of volume.

Meaning depends on location:

At Support:

→ Buyers accumulating
→ Possible reversal up

At Resistance:

→ Sellers unloading
→ Possible reversal down

At Breakout:

→ Strong breakout
→ High chance of continuation

At Breakdown:

→ Big players shorting
→ Downtrend strong

D. No Volume Zone

Extremely low volume.

This indicates:

• Range day

• Premium decay

• No trend

• Avoid option buying

Option buyers MUST avoid these zones.

3. How Volume Confirms Market Structure

Volume + Structure = Elite accuracy.

Let’s combine:

Uptrend (HH + HL) + Increasing Volume

→ VERY strong trend
→ Best time for option buying

Downtrend (LL + LH) + Increasing Volume

→ Clear continuation
→ Best time to buy PE or sell CE spreads

Breakout + Low Volume

→ Fake breakout
→ Avoid buying

Breakout + High Volume

→ Genuine breakout
→ High probability trend day

Pullback + Low Volume

→ Controlled, natural retracement
→ Perfect pulling-back entry

Pullback + High Volume Against Trend

→ Trend reversal warning
→ Exit long positions

4. Volume Traps (Retail Killer)

Institutions often create fake moves with misleading volume.

These 3 traps occur almost daily:

Trap 1 — Breakout Candle with High Volume but Next Candle Reverses

Meaning:
Big players exited positions into breakout excitement.

Avoid entering these.

Trap 2 — Sudden Volume at Top (Climactic Volume)

A large bullish candle with huge volume at the top.

This usually means:
→ Smart money exiting
→ Market likely to fall

Trap 3 — Low Volume Breakdown

Breakdown with no volume → No strength → Will reverse.

Avoid selling here.

5. Volume in Options Trading

Volume behaves differently in options because of:

• Premium decay

• Bid-ask spread

• Intraday volatility

• Delta changes

But the underlying market volume (Nifty/BankNifty) ALWAYS leads the option move.

Rule:

“Always read volume on the INDEX, not the OPTION.”

Option volume is misleading.