In the science of Technical Analysis, Volume plays a role which is as important as any other basic indicator. An increase in the volume in conjuction with Stock price moves adds strength and momentum in the direction of the move. It reflects the market's confidence that the uptrend will continue in force, or its pessimism that the downtrend will.
An increase in abnormal volume can alert investors to coming price movements, Up or Down, before it becomes obvious to the overall market. Therefore, the market axiom "Volumes Precedes Price."
Historically, the majority of BULL MARKETS have originated with atleast two days within two-month period where upside volume is atleast nine times greater than the downside volume. Investors who track volume and spot the two-day Exceptional Upside Indicator can out-maneuver other investors and earn excess returns by positioning themselves for the coming Bull Market.
The Daily Volume Indicator measures extremes in the Supply/ Demand relationship. If a Stock closes at the mid point of its trading range for the day, the indicato reflects no change. Closing Price above or below the trading range midpoint show an increase or decrease in the Daily Volume Indicator, respectively.
In constructing the Daily Volume Indicators, Technical Analysts take into account the day's volume, closing price, Distance between closing Price and the mid point, and the Trading Range.
These are just the basic characterstics of the Volumes, these must be read in conjuction with other commonly used indicators before drawing up any conclusion.