Forex

Volume represents the activity of traders and investors. Each unit of volume
in the market reflects the action of two persons: One trader sells a share and
another buys a share, or one buys a contract and another sells a contract.
Daily volume is the number of contracts or shares traded in one day.
Traders usually plot volume as a histogram-vertical bars whose height
reflects each day's volume (Figure 32-1). They usually draw it underneath
prices. Changes in volume show how bulls and bears react to price swings.
Changes in volume provide clues as to whether trends are likely to continue
or to reverse.
Some traders ignore volume. They think that prices already reflect all
information known to the market. They say, "You get paid on price and not
on volume." Professionals, on the other hand, know that analyzing volume
can help them understand markets deeper and trade better.
There are three ways to measure volume:
1. The actual number of shares or contracts traded. For example, the
New York Stock Exchange reports volume this way. This is the most
objective way of measuring volume.
2. The number of trades that took place. For example, the London Stock
Exchange reports volume this way. This method is less objective
because it does not distinguish between a 100-share trade and a 5000-
share trade.

Volume reflects the activity of buyers and sellers. If you compare volume
between two markets, it will show which one is more active or liquid. You
are likely to suffer less slippage in liquid markets than in thin, low-volume
markets.