Here are some of the ways that traders can use trading volume:
Confirm Trends: Trading volume can be used to confirm trends. For example, if a stock is trending up and trading volume increases, it suggests that the uptrend is likely to continue.
Identify Reversals: Trading volume can also be used to identify reversals. For example, if a stock is trending up and trading volume suddenly drops, it suggests that the uptrend may be weakening.
Identify Overbought and Oversold Conditions: Trading volume can also be used to identify overbought and oversold conditions. For example, if a stock is trading at a high price and trading volume is declining, it suggests that the stock may be overbought and should be corrected.