Hi,
there are no. of volumes which are of importance :
a. average volume - this basically denotes the liquidity of the stock. if a stock is illiquid, it would be difficult to come out of the stock when desired. If the volume is good, it would provide liquidity and would help an investor come out when he wants. Also, average volume * average stock price over a user defined period would also help investor, how much investment can be made. eg. if the average volume * average stock price comes to say 50L, to me investor should not put more than 2L into the stock.
b. volume (absolute) : a volume on a specific day is not of much importance in absolute terms. if volume is high say more than 10 times average volume and is as a lower range of wave, a user can track the stock and see if the uptrend builds and take a decision only after confirmed uptrend. if the volume surge happens at high of a wave and the stocks shows downward movement, investor can wait and see if the downtrend has begun and he might decide to come out. during my study, this absolute volume has been of very low importance.
c. increase in volume - consolidation / accumulation - Usually this would happen in the lower range of a wave, when investors interest builds up and stock may start an uptrend based on the accumulation. Watch out for false signals.
happy investing
