Volume is the number of stocks and shares that are traded on a particular time frame. A high volume bar in any particular time period will indicate that a large number of shares have exchanged hands. This in turn is indicating that demand or supply for this stock is high and is an indicator of higher liquidity.

The greater the stock demand the greater the chance of the stock price increasing and likewise greater supply is more likely to make it fall. Both scenarios can result in large volume increases that can be gradual or may result in sharp increases called spikes. These spikes can occur especially after certain news events related to the company. The volume of the stock will deviate significantly from its average range signifying an increase in the trading of the stock.

The following chart shows the daily price and volume chart of the company Amazon.


From this chart it can be seen that there is a volume increase at the end of January which initially sends the price higher but then a sudden spike and the stock gaps lower. A further volume bar that is higher than the average confirms that demand for this stock is weak and traders are in the process of selling at a lower price.