Below you will find some points about volume and volume-based technical analysis. In particular, we have attempted to gather some statements that will help to better understand volume.

• Volume is always a two-sided matter. There is always a buyer and a seller. When the volume equals one, it means that one seller sold one share to one buyer. If the volume equals one million, it means that a group of sellers have sold one million shares to another group of buyers. By itself, volume does not show whether traders are selling or buying, nor does it show whether there more buyers or sellers. The Volume shows the number of shares transferred from sellers to buyers.
•  If the price declines, it means that sellers are willing to sell at a cheaper price than the "ask price" and that there are not enough buyers to satisfy the demand of these sellers. If the price moves up, it means that the buyers are ready to pay a higher price than the "bid price" and that there are not enough sellers to satisfy their demand.
•  There are four major factors that can be obtained from volume analysis:
  •  Money Flow - Money Flow allows one to see whether the money is coming in or going out. Changes in the money flow allow one to spot changes in the trend.
  •  Accumulation - Volume allows one to see how strongly a stock, index or market is overbought or oversold by measuring the intensity of trading during the price advance or price decline. The more volume accumulated during a trend, the stronger the reversal that can be expected.
  •  Volume Surges and Volume Spikes - Volume allows one to spot periods of panic selling and greedy buying that are revealed through big volume surges and volume spikes. As was mentioned above, volume is always a two-sided matter. For each buyer, there is a seller and a volume surge means that a group of traders have decided to satisfy the demand of other traders.
    
    A volume surge during a price decline revels that a group of institutional traders (who have a great deal of money) have became attracted by the low bargain price at that moment and decided to buy in large quantities from the group of panic traders who were pushing the price down. Alternatively, a volume surge during a price advance reveals that the institutional traders have decided to sell in large quantities to greedy buyers. As a rule, big volume surges lead to a shift in the supply/demand balance, followed by a trend reversal.
  •  Liquidity – the volume allows one to see how liquid a stock or any other security is. The higher the average volume is, the more liquid the stock is and, also, the easier it is to sell or buy this stock. Such stocks as QQQQ and SPY are among the most liquid stocks in the world - they have the highest average daily trading volumes.
•  Most of the volume-based technical indicators are leading indicators - indicators that predict trend reversals.
•  When it comes to volume analysis, the best results can be achieved when volume indicators are applied to highly liquid stocks or to the indexes and exchanges. Accordingly, many professional and institutional traders apply volume analysis to the S&P 500 (^SPX), Nasdaq 100 (^NDX), Dow Jones Industrials (^DJI) and other indexes to trade index derivatives (QQQQ, SPY, DIA, XLF, IWM, etc), emini index futures, index options, options on index derivatives, index funds and other securities and commodities that track the performance of indexes.
• The volume of the NYSE (^NYA), AMEX (^XAX) and NASDAQ (^COMP) exchanges have become the benchmark of the U.S. Economy's health.

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