Basics of Volume.

Volume is a very useful tool in helping traders understand how a stock is trading. At its most basic and fundamental level, volume is simply the number of shares or contracts traded in a security within a specific time frame. Time frames can be 5 seconds to 1 day to 1 year and beyond, depending on how a trader is trading a stock, security, or contract. For every buyer in the market, there is a seller, and for every seller, there is a buyer. When these shares exchange hands from buyer to seller and vice versa, this becomes what is known as "volume" of shares traded on an exchange. To keep it very simple, take a look at the following:

Buyer A owns 10,000 shares of Stock XYZ.

Seller B buys 10,000 shares of Stock XYZ from Buyer A.

The total volume on that trade between Buyer A and Seller B is 10,000 shares of Stock XYZ.

If this one trade was the only trade of Stock XYZ for the given trading period or day, the total volume for that day would be 10,000 shares.

Now within the basic concept of volume, there exists "buy" volume and "sell" volume. Buy volume and sell volume, what the heck is that? Well, again, to keep it simple, buy volume is the amount of volume dedicated to buyers in the market place. For every seller, there is a buyer, and the buyers are included in the "buy" volume. A buyer "buys" from the seller. Well, how do you know the difference between buy volume and sell volume? Seems difficult, but it is not. Buyers drive the price up. So when someone sees a stock price increasing, basically "buy volume", also know as "buying pressure", is applied to the stock, which drives the stock price up. I also like to call it "Bulls on Parade." Buyers are in control of the security whenever the buy volume is high, which creates a "bullish" market for the security.

Sell volume is the exact opposite of buy volume. For every buyer, there is a seller, and the sellers are included in the "sell" volume. A seller "sells" to the buyer. So when someone sees a stock price decreasing, basically "sell volume", also know as selling pressure, is applied to the stock, which drives the price down. I also like to call it "Bears on Parade." Sellers are in control of the security whenever the sell volume is high, which creates a "bearish" market for the security.

Volume and the direction of the stock will tell you if the market is bullish or bearish for a particular security.

Basic Bull Volume: High (Increased) volume + Buying Pressure = Bulls are in control, ie stock price is driving higher.

Basic Bear Volume: High (Increased) volume + Selling Pressure = Bears are in control, ie stock price is driving lower.

To sum up, volume is a key indicator that tells us a bull market vs a bear market and who is controlling these markets.
These are the basics of volume, and I will be writing more about volume as it relates to the "bid/ask" spread.

I have included a link to investopedia's definition of volume above in the title.